Why You Might Be Interested In Signature International Berhad (KLSE:SIGN) For Its Upcoming Dividend

Readers hoping to buy Signature International Berhad (KLSE:SIGN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Signature International Berhad's shares on or after the 1st of October will not receive the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be RM00.0175 per share. Last year, in total, the company distributed RM0.047 to shareholders. Based on the last year's worth of payments, Signature International Berhad has a trailing yield of 3.5% on the current stock price of RM01.34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Signature International Berhad can afford its dividend, and if the dividend could grow.

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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. Signature International Berhad paid out a comfortable 42% of its profit last year.

See our latest analysis for Signature International Berhad

Click here to see how much of its profit Signature International 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. It's encouraging to see Signature International Berhad has grown its earnings rapidly, up 34% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Signature International Berhad has increased its dividend at approximately 4.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Signature International Berhad is keeping back more of its profits to grow the business.

Final Takeaway

Should investors buy Signature International Berhad for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Signature International Berhad appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Signature International Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Signature International Berhad you should be aware of.

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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.