Three Days Left Until Magnum Berhad (KLSE:MAGNUM) Trades Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Magnum Berhad (KLSE:MAGNUM) is about to go ex-dividend in just three 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Magnum Berhad's shares before the 7th of September in order to be eligible for the dividend, which will be paid on the 23rd of September.
The company's next dividend payment will be RM00.035 per share, on the back of last year when the company paid a total of RM0.09 to shareholders. Based on the last year's worth of payments, Magnum Berhad stock has a trailing yield of around 7.1% on the current share price of RM01.26. If you buy this business for its dividend, you should have an idea of whether Magnum Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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 87% 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. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range 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.
View our latest analysis for Magnum 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Magnum Berhad's earnings have been skyrocketing, up 51% per annum for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Magnum Berhad has seen its dividend decline 1.0% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Should investors buy Magnum Berhad for the upcoming dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Magnum Berhad's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 87% and 58% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Magnum Berhad today.
While it's tempting to invest in Magnum Berhad for the dividends alone, you should always be mindful of the risks involved. For example - Magnum Berhad has 1 warning sign we think 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.