Harbour-Link Group Berhad (KLSE:HARBOUR) Will Pay A RM00.03 Dividend In Three Days

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 Harbour-Link Group Berhad (KLSE:HARBOUR) is about to go ex-dividend in just three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Harbour-Link Group Berhad's shares on or after the 13th of March will not receive the dividend, which will be paid on the 3rd of April.

The company's next dividend payment will be RM00.03 per share, and in the last 12 months, the company paid a total of RM0.06 per share. Calculating the last year's worth of payments shows that Harbour-Link Group Berhad has a trailing yield of 4.3% on the current share price of RM01.40. If you buy this business for its dividend, you should have an idea of whether Harbour-Link Group Berhad's dividend is reliable and sustainable. So we need to investigate whether Harbour-Link Group Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Harbour-Link Group Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Harbour-Link Group Berhad paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the past year it paid out 157% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Harbour-Link Group Berhad does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Harbour-Link Group 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 Harbour-Link Group Berhad's ability to maintain its dividend.

Click here to see how much of its profit Harbour-Link Group Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Harbour-Link Group Berhad has grown its earnings rapidly, up 34% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Harbour-Link Group Berhad has delivered an average of 18% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Harbour-Link Group Berhad got what it takes to maintain its dividend payments? We like that Harbour-Link Group Berhad has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Harbour-Link Group Berhad's dividend merits.

While it's tempting to invest in Harbour-Link Group Berhad for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Harbour-Link Group Berhad you should be aware of.

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