Here's What We Like About Hengyuan Refining Company Berhad's (KLSE:HENGYUAN) Upcoming Dividend

It looks like Hengyuan Refining Company Berhad (KLSE:HENGYUAN) is about to go ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Hengyuan Refining Company Berhad's shares before the 14th of September in order to receive the dividend, which the company will pay on the 28th of September.

The company's next dividend payment will be RM00.10 per share, on the back of last year when the company paid a total of RM0.20 to shareholders. Based on the last year's worth of payments, Hengyuan Refining Company Berhad has a trailing yield of 6.3% on the current stock price of RM03.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Hengyuan Refining Company Berhad paid out just 4.5% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

See our latest analysis for Hengyuan Refining Company Berhad

Click here to see how much of its profit Hengyuan Refining Company Berhad paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Hengyuan Refining Company Berhad's earnings per share have risen 19% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Hengyuan Refining Company Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hengyuan Refining Company Berhad has delivered an average of 29% per year annual increase in its dividend, based on the past nine years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy Hengyuan Refining Company Berhad for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Hengyuan Refining Company Berhad more closely.

In light of that, while Hengyuan Refining Company Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 5 warning signs for Hengyuan Refining Company Berhad (of which 4 are potentially serious!) you should know about.

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.