Only Three Days Left To Cash In On PETRONAS Gas Berhad's (KLSE:PETGAS) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see PETRONAS Gas Berhad (KLSE:PETGAS) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase PETRONAS Gas Berhad's shares before the 13th of June to receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be RM00.16 per share. Last year, in total, the company distributed RM0.72 to shareholders. Based on the last year's worth of payments, PETRONAS Gas Berhad has a trailing yield of 3.9% on the current stock price of RM018.28. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for PETRONAS Gas 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. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that PETRONAS Gas 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?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about PETRONAS Gas Berhad's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A high payout ratio of 77% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, PETRONAS Gas Berhad could be signalling that its future growth prospects are thin.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PETRONAS Gas Berhad has delivered 3.7% dividend growth per year on average over the past 10 years.

The Bottom Line

Is PETRONAS Gas Berhad an attractive dividend stock, or better left on the shelf? PETRONAS Gas Berhad has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear unsustainable. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into PETRONAS Gas Berhad, it's worth knowing the risks this business faces. For example, we've found 1 warning sign for PETRONAS Gas Berhad that we recommend you consider before investing in the business.

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.

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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.