Read This Before Considering Prolintas Infra Business Trust (KLSE:PLINTAS) For Its Upcoming RM00.0318 Dividend

Readers hoping to buy Prolintas Infra Business Trust (KLSE:PLINTAS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Prolintas Infra Business Trust investors that purchase the stock on or after the 9th of September will not receive the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be RM00.0318 per share, and in the last 12 months, the company paid a total of RM0.064 per share. Calculating the last year's worth of payments shows that Prolintas Infra Business Trust has a trailing yield of 6.9% on the current share price of RM00.92. 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 Prolintas Infra Business Trust can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Prolintas Infra Business Trust paid out 182% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's good to see that while Prolintas Infra Business Trust's dividends were not covered by profits, at least they are affordable from a cash perspective. 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.

View our latest analysis for Prolintas Infra Business Trust

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Prolintas Infra Business Trust has grown its earnings rapidly, up 25% a year for the past three years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Prolintas Infra Business Trust's dividend payments are broadly unchanged compared to where they were two years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid Prolintas Infra Business Trust? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Prolintas Infra Business Trust is paying out so much of its profit. All things considered, we are not particularly enthused about Prolintas Infra Business Trust from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 3 warning signs we've spotted with Prolintas Infra Business Trust (including 2 which shouldn't be ignored).

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.