It looks like Sime Darby Plantation Berhad (KLSE:SIMEPLT) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day 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, Sime Darby Plantation Berhad investors that purchase the stock on or after the 27th of April will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be RM0.06 per share. Last year, in total, the company distributed RM0.16 to shareholders. Based on the last year's worth of payments, Sime Darby Plantation Berhad has a trailing yield of 3.7% on the current stock price of MYR4.31. 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! So we need to investigate whether Sime Darby Plantation Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Sime Darby Plantation Berhad

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. Fortunately Sime Darby Plantation Berhad's payout ratio is modest, at just 45% of profit. 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. Over the last year, it paid out more than three-quarters (86%) 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 Sime Darby Plantation 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Sime Darby Plantation Berhad's 12% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.