Interested In Atlan Holdings Bhd's (KLSE:ATLAN) Upcoming RM00.05 Dividend? You Have Three Days Left

Atlan Holdings Bhd (KLSE:ATLAN) stock is about to trade ex-dividend in 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. Accordingly, Atlan Holdings Bhd investors that purchase the stock on or after the 30th of July will not receive the dividend, which will be paid on the 21st of August.

The company's next dividend payment will be RM00.05 per share, on the back of last year when the company paid a total of RM0.10 to shareholders. Based on the last year's worth of payments, Atlan Holdings Bhd stock has a trailing yield of around 3.8% on the current share price of RM02.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Atlan Holdings Bhd has been able to grow its dividends, or if the dividend might be cut.

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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. Last year, Atlan Holdings Bhd paid out 213% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser. A useful secondary check can be to evaluate whether Atlan Holdings Bhd generated enough free cash flow to afford its dividend. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Atlan Holdings Bhd fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Check out our latest analysis for Atlan Holdings Bhd

Click here to see how much of its profit Atlan Holdings Bhd 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 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 Atlan Holdings Bhd has grown its earnings rapidly, up 41% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Atlan Holdings Bhd has seen its dividend decline 9.6% per annum on average over the past 10 years, which is not great to see. Atlan Holdings Bhd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Atlan Holdings Bhd worth buying for its dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. To summarise, Atlan Holdings Bhd looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into Atlan Holdings Bhd, it's worth knowing the risks this business faces. For example, we've found 4 warning signs for Atlan Holdings Bhd (1 is a bit concerning!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.