PETRONAS Dagangan Berhad (KLSE:PETDAG) is about to trade ex-dividend in the next four days. The ex-dividend date is commonly two business days 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 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 PETRONAS Dagangan Berhad's shares before the 8th of September to receive the dividend, which will be paid on the 23rd of September.
The company's upcoming dividend is RM00.25 a share, following on from the last 12 months, when the company distributed a total of RM1.10 per share to shareholders. Based on the last year's worth of payments, PETRONAS Dagangan Berhad stock has a trailing yield of around 5.5% on the current share price of RM020.38. If you buy this business for its dividend, you should have an idea of whether PETRONAS Dagangan Berhad's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Its dividend payout ratio is 76% 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 flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that PETRONAS Dagangan 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.
See our latest analysis for PETRONAS Dagangan Berhad
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see PETRONAS Dagangan Berhad has grown its earnings rapidly, up 34% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, PETRONAS Dagangan Berhad has increased its dividend at approximately 7.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is PETRONAS Dagangan Berhad worth buying for its dividend? We like PETRONAS Dagangan Berhad's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about PETRONAS Dagangan Berhad, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks PETRONAS Dagangan Berhad is facing. For example, we've found 2 warning signs for PETRONAS Dagangan Berhad (1 shouldn't be ignored!) 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.
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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.