Is It Worth Considering Harrisons Holdings (Malaysia) Berhad (KLSE:HARISON) 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 Harrisons Holdings (Malaysia) Berhad (KLSE:HARISON) is about to trade ex-dividend in the next three 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 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. Thus, you can purchase Harrisons Holdings (Malaysia) Berhad's shares before the 16th of July in order to receive the dividend, which the company will pay on the 18th of August.
The company's next dividend payment will be RM00.065 per share, and in the last 12 months, the company paid a total of RM0.065 per share. Calculating the last year's worth of payments shows that Harrisons Holdings (Malaysia) Berhad has a trailing yield of 4.9% on the current share price of RM01.32. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Harrisons Holdings (Malaysia) Berhad is paying out an acceptable 52% of its profit, a common payout level among most companies. 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. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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 Harrisons Holdings (Malaysia) Berhad
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. With that in mind, we're encouraged by the steady growth at Harrisons Holdings (Malaysia) Berhad, with earnings per share up 7.7% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Harrisons Holdings (Malaysia) Berhad has lifted its dividend by approximately 8.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has Harrisons Holdings (Malaysia) Berhad got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Harrisons Holdings (Malaysia) Berhad paid out a bit over half of its earnings and free cash flow last year. Overall, it's hard to get excited about Harrisons Holdings (Malaysia) Berhad from a dividend perspective.
With that being said, if dividends aren't your biggest concern with Harrisons Holdings (Malaysia) Berhad, you should know about the other risks facing this business. Our analysis shows 1 warning sign for Harrisons Holdings (Malaysia) Berhad and you should be aware of it before buying any shares.
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.