Dividend Investors: Don't Be Too Quick To Buy Cloudpoint Technology Berhad (KLSE:CLOUDPT) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cloudpoint Technology Berhad (KLSE:CLOUDPT) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Cloudpoint Technology Berhad's shares before the 9th of December in order to receive the dividend, which the company will pay on the 23rd of December.

The company's next dividend payment will be RM00.01 per share. Last year, in total, the company distributed RM0.02 to shareholders. Last year's total dividend payments show that Cloudpoint Technology Berhad has a trailing yield of 2.2% on the current share price of RM00.925. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Cloudpoint Technology Berhad

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Cloudpoint Technology Berhad is paying out an acceptable 55% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 272% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Cloudpoint Technology Berhad intends to continue funding this dividend, or if it could be forced to cut the payment.

Cloudpoint Technology Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Cloudpoint Technology Berhad's ability to maintain its dividend.

Click here to see how much of its profit Cloudpoint Technology Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Cloudpoint Technology Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 62% a year over the past five years.

Unfortunately Cloudpoint Technology Berhad has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Cloudpoint Technology Berhad worth buying for its dividend? Cloudpoint Technology Berhad had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Cloudpoint Technology Berhad.

Although, if you're still interested in Cloudpoint Technology Berhad and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for Cloudpoint Technology Berhad (1 is significant!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.