Is It Smart To Buy Sports Toto Berhad (KLSE:SPTOTO) Before It Goes Ex-Dividend?

Sports Toto Berhad (KLSE:SPTOTO) is about to trade ex-dividend in the next four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Sports Toto Berhad investors that purchase the stock on or after the 30th of December will not receive the dividend, which will be paid on the 16th of January.

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 RM0.08 to shareholders. Looking at the last 12 months of distributions, Sports Toto Berhad has a trailing yield of approximately 5.9% on its current stock price of RM01.35. If you buy this business for its dividend, you should have an idea of whether Sports Toto Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Sports Toto Berhad has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Sports Toto Berhad paying out a modest 50% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 62% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

Check out our latest analysis for Sports Toto 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. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Sports Toto Berhad's earnings per share have risen 10% per annum over the last five years. Sports Toto 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. Sports Toto Berhad has seen its dividend decline 9.4% 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

Is Sports Toto Berhad worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Sports Toto Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 2 warning signs for Sports Toto Berhad (1 is a bit concerning) 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.