MISC Berhad (KLSE:MISC) Is About To Go Ex-Dividend, And It Pays A 4.3% Yield

It looks like MISC Berhad (KLSE:MISC) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase MISC Berhad's shares before the 6th of September in order to be eligible for the dividend, which will be paid on the 26th of September.

The company's upcoming dividend is RM00.08 a share, following on from the last 12 months, when the company distributed a total of RM0.36 per share to shareholders. Last year's total dividend payments show that MISC Berhad has a trailing yield of 4.3% on the current share price of RM08.39. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether MISC Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for MISC 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. MISC Berhad paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether MISC Berhad generated enough free cash flow to afford its dividend. The company paid out 92% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

MISC Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were MISC Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, MISC Berhad's earnings per share have been growing at 12% a year for the past five years. Earnings have been growing at a decent rate, 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. MISC Berhad has delivered an average of 22% 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid MISC Berhad? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note MISC Berhad paid out a much higher percentage of its free cash flow, which makes us uncomfortable. All things considered, we are not particularly enthused about MISC Berhad from a dividend perspective.

Curious what other investors think of MISC Berhad? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.