Padini Holdings Berhad (KLSE:PADINI) Passed Our Checks, And It's About To Pay A RM00.018 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Padini Holdings Berhad (KLSE:PADINI) is about to trade ex-dividend in the next four days. 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Padini Holdings Berhad's shares before the 14th of September in order to receive the dividend, which the company will pay on the 30th of September.
The company's next dividend payment will be RM00.018 per share, on the back of last year when the company paid a total of RM0.092 to shareholders. Calculating the last year's worth of payments shows that Padini Holdings Berhad has a trailing yield of 8.1% on the current share price of RM01.13. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's 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. Padini Holdings Berhad paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Padini Holdings Berhad
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. 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 Padini Holdings Berhad's earnings per share have risen 16% per annum over the last five years. Padini Holdings Berhad has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Padini Holdings Berhad has lifted its dividend by approximately 3.3% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
Should investors buy Padini Holdings Berhad for the upcoming dividend? Padini Holdings Berhad's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Padini Holdings Berhad, and we would prioritise taking a closer look at it.
While it's tempting to invest in Padini Holdings Berhad for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Padini Holdings Berhad you should be aware of.
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.