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

Cloudpoint Technology Berhad (KLSE:CLOUDPT) stock is about to trade ex-dividend in four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Cloudpoint Technology Berhad investors that purchase the stock on or after the 12th of March will not receive the dividend, which will be paid on the 2nd of April.

The company's next dividend payment will be RM00.01 per share, and in the last 12 months, the company paid a total of RM0.02 per share. Looking at the last 12 months of distributions, Cloudpoint Technology Berhad has a trailing yield of approximately 2.6% on its current stock price of RM00.77. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Cloudpoint Technology Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Cloudpoint Technology Berhad is paying out an acceptable 52% 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. Dividends consumed 72% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Cloudpoint Technology Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Cloudpoint Technology Berhad's earnings per share have plummeted approximately 61% a year over the previous five years.

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

To Sum It Up

Has Cloudpoint Technology Berhad got what it takes to maintain its dividend payments? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. 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. Every company has risks, and we've spotted 2 warning signs for Cloudpoint Technology Berhad you should know about.

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

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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.