Crest Builder Holdings Berhad (KLSE:CRESBLD) Passed Our Checks, And It's About To Pay A RM00.02 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Crest Builder Holdings Berhad (KLSE:CRESBLD) is about to trade ex-dividend in the next 3 days. 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. Accordingly, Crest Builder Holdings Berhad investors that purchase the stock on or after the 5th of August will not receive the dividend, which will be paid on the 27th of August.
The company's next dividend payment will be RM00.02 per share. Last year, in total, the company distributed RM0.02 to shareholders. Looking at the last 12 months of distributions, Crest Builder Holdings Berhad has a trailing yield of approximately 4.5% on its current stock price of RM00.445. If you buy this business for its dividend, you should have an idea of whether Crest Builder Holdings Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Crest Builder Holdings Berhad's payout ratio is modest, at just 28% of profit.
Check out our latest analysis for Crest Builder Holdings Berhad
Click here to see how much of its profit Crest Builder Holdings Berhad 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 Crest Builder Holdings Berhad has grown its earnings rapidly, up 55% a year for the past five years. Crest Builder Holdings Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.
We'd also point out that Crest Builder Holdings Berhad issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Crest Builder Holdings Berhad has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
Should investors buy Crest Builder Holdings 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. In summary, Crest Builder Holdings Berhad appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
So while Crest Builder Holdings Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for Crest Builder Holdings Berhad that we strongly recommend you have a look at before investing in the company.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.