Wellcall Holdings Berhad (KLSE:WELLCAL) Stock Goes Ex-Dividend In Just Three Days
Wellcall Holdings Berhad (KLSE:WELLCAL) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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. In other words, investors can purchase Wellcall Holdings Berhad's shares before the 11th of December in order to be eligible for the dividend, which will be paid on the 22nd of December.
The company's upcoming dividend is RM00.024 a share, following on from the last 12 months, when the company distributed a total of RM0.08 per share to shareholders. Based on the last year's worth of payments, Wellcall Holdings Berhad stock has a trailing yield of around 5.9% on the current share price of RM01.35. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in 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. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Wellcall Holdings 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.
Check out our latest analysis for Wellcall Holdings 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Wellcall Holdings Berhad earnings per share are up 9.7% per annum 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. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Wellcall Holdings Berhad has lifted its dividend by approximately 3.4% 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.
To Sum It Up
Has Wellcall Holdings Berhad got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. Overall, it's hard to get excited about Wellcall Holdings Berhad from a dividend perspective.
However if you're still interested in Wellcall Holdings Berhad as a potential investment, you should definitely consider some of the risks involved with Wellcall Holdings Berhad. In terms of investment risks, we've identified 1 warning sign with Wellcall Holdings Berhad and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.