Is It Smart To Buy APM Automotive Holdings Berhad (KLSE:APM) Before It Goes Ex-Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that APM Automotive Holdings Berhad (KLSE:APM) is about to go ex-dividend in just three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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, APM Automotive Holdings Berhad investors that purchase the stock on or after the 10th of September will not receive the dividend, which will be paid on the 2nd of October.
The company's next dividend payment will be RM00.05 per share. Last year, in total, the company distributed RM0.20 to shareholders. Based on the last year's worth of payments, APM Automotive Holdings Berhad stock has a trailing yield of around 6.8% on the current share price of RM02.93. 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 check whether the dividend payments are covered, and if earnings are growing.
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. APM Automotive Holdings Berhad is paying out an acceptable 52% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether APM Automotive Holdings Berhad generated enough free cash flow to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that APM Automotive Holdings Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for APM Automotive Holdings Berhad
Click here to see how much of its profit APM Automotive 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 APM Automotive Holdings Berhad has grown its earnings rapidly, up 41% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. APM Automotive Holdings Berhad's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
Is APM Automotive Holdings Berhad worth buying for its dividend? We like APM Automotive Holdings Berhad's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. APM Automotive Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while APM Automotive Holdings Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for APM Automotive Holdings Berhad 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.