Telekom Malaysia Berhad (KLSE:TM) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Telekom Malaysia Berhad (KLSE:TM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. Meaning, you will need to purchase Telekom Malaysia Berhad's shares before the 13th of March to receive the dividend, which will be paid on the 28th of March.

The company's upcoming dividend is RM00.185 a share, following on from the last 12 months, when the company distributed a total of RM0.25 per share to shareholders. Based on the last year's worth of payments, Telekom Malaysia Berhad has a trailing yield of 3.6% on the current stock price of RM06.90. If you buy this business for its dividend, you should have an idea of whether Telekom Malaysia Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Telekom Malaysia Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Telekom Malaysia Berhad

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Telekom Malaysia Berhad paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Telekom Malaysia Berhad generated enough free cash flow to afford its dividend. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Telekom Malaysia 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Telekom Malaysia Berhad's earnings have been skyrocketing, up 26% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Telekom Malaysia Berhad's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Has Telekom Malaysia Berhad got what it takes to maintain its dividend payments? Telekom Malaysia Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Telekom Malaysia Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Telekom Malaysia Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Telekom Malaysia Berhad (1 is concerning!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.