Should You Buy Kimlun Corporation Berhad (KLSE:KIMLUN) For Its Upcoming Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Kimlun Corporation Berhad (KLSE:KIMLUN) is about to trade ex-dividend in the next 3 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. Accordingly, Kimlun Corporation Berhad investors that purchase the stock on or after the 2nd of July will not receive the dividend, which will be paid on the 30th of July.
The company's upcoming dividend is RM00.04 a share, following on from the last 12 months, when the company distributed a total of RM0.04 per share to shareholders. Based on the last year's worth of payments, Kimlun Corporation Berhad stock has a trailing yield of around 4.0% on the current share price of RM00.99. If you buy this business for its dividend, you should have an idea of whether Kimlun Corporation Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Kimlun Corporation Berhad has been able to grow its dividends, or if the dividend might be cut.
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. Kimlun Corporation Berhad paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 9.3% of its free cash flow in the last year.
It's positive to see that Kimlun Corporation 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 Kimlun Corporation Berhad
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Kimlun Corporation Berhad's earnings have been skyrocketing, up 58% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Kimlun Corporation Berhad looks like a promising growth company.
We'd also point out that Kimlun Corporation Berhad issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kimlun Corporation Berhad's dividend payments per share have declined at 3.6% per year on average over the past 10 years, which is uninspiring. 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
From a dividend perspective, should investors buy or avoid Kimlun Corporation Berhad? Kimlun Corporation Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Kimlun Corporation Berhad, and we would prioritise taking a closer look at it.
While it's tempting to invest in Kimlun Corporation Berhad for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Kimlun Corporation Berhad (of which 1 is significant!) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.