Three Days Left To Buy Freight Management Holdings Bhd (KLSE:FREIGHT) Before The Ex-Dividend Date

Freight Management Holdings Bhd (KLSE:FREIGHT) stock is about to trade ex-dividend in three days. Investors can purchase shares before the 5th of March in order to be eligible for this dividend, which will be paid on the 22nd of March.

Freight Management Holdings Bhd's next dividend payment will be RM0.02 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Calculating the last year's worth of payments shows that Freight Management Holdings Bhd has a trailing yield of 3.1% on the current share price of MYR1.27. 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! So we need to investigate whether Freight Management Holdings Bhd can afford its dividend, and if the dividend could grow.

View our latest analysis for Freight Management Holdings Bhd

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. Freight Management Holdings Bhd paid out 72% of its earnings to investors last year, a normal payout level for most businesses. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Freight Management Holdings Bhd's 6.6% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Freight Management Holdings Bhd has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

From a dividend perspective, should investors buy or avoid Freight Management Holdings Bhd? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Freight Management Holdings Bhd, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 3 warning signs for Freight Management Holdings Bhd that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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