Ta Ann Holdings Berhad (KLSE:TAANN) Passed Our Checks, And It's About To Pay A RM00.05 Dividend

It looks like Ta Ann Holdings Berhad (KLSE:TAANN) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Ta Ann Holdings Berhad's shares on or after the 11th of June, you won't be eligible to receive the dividend, when it is paid on the 3rd of July.

The company's next dividend payment will be RM00.05 per share, and in the last 12 months, the company paid a total of RM0.40 per share. Looking at the last 12 months of distributions, Ta Ann Holdings Berhad has a trailing yield of approximately 3.8% on its current stock price of RM05.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Ta Ann Holdings Berhad can afford its dividend, and if the dividend could grow.

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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. Ta Ann Holdings Berhad paid out 68% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Ta Ann Holdings Berhad generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

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.

See our latest analysis for Ta Ann Holdings Berhad

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Ta Ann Holdings Berhad's earnings have been skyrocketing, up 37% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ta Ann Holdings Berhad has delivered 1.8% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Ta Ann Holdings Berhad is keeping back more of its profits to grow the business.

The Bottom Line

Is Ta Ann Holdings Berhad worth buying for its dividend? We like Ta Ann Holdings 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. Ta Ann Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Ta Ann Holdings Berhad and you should be aware of this before buying any shares.

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.