We Wouldn't Be Too Quick To Buy Bonia Corporation Berhad (KLSE:BONIA) Before It Goes Ex-Dividend
Readers hoping to buy Bonia Corporation Berhad (KLSE:BONIA) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Bonia Corporation Berhad's shares before the 14th of September to receive the dividend, which will be paid on the 30th of September.
The company's next dividend payment will be RM00.02 per share, on the back of last year when the company paid a total of RM0.04 to shareholders. Looking at the last 12 months of distributions, Bonia Corporation Berhad has a trailing yield of approximately 4.7% on its current stock price of RM00.845. If you buy this business for its dividend, you should have an idea of whether Bonia Corporation Berhad's dividend is reliable and sustainable. So we need to investigate whether Bonia Corporation Berhad can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year Bonia Corporation Berhad paid out 104% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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. It paid out 5.4% of its free cash flow as dividends last year, which is conservatively low.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Bonia Corporation Berhad fortunately did generate enough cash to fund its dividend. 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.
See our latest analysis for Bonia Corporation Berhad
Click here to see how much of its profit Bonia Corporation Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Bonia Corporation Berhad's earnings per share have dropped 10% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bonia Corporation Berhad's dividend payments per share have declined at 2.2% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
The Bottom Line
Is Bonia Corporation Berhad worth buying for its dividend? It's never great to see earnings per share declining, especially when a company is paying out 104% of its profit as dividends, which we feel is uncomfortably high. However, the cash payout ratio was much lower - good news from a dividend perspective - which makes us wonder why there is such a mis-match between income and cashflow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Although, if you're still interested in Bonia Corporation Berhad and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 3 warning signs for Bonia Corporation Berhad that we strongly recommend you have a look at before investing in the company.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.