Kerjaya Prospek Group Berhad (KLSE:KERJAYA) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Therefore, if you purchase Kerjaya Prospek Group Berhad's shares on or after the 7th of September, you won't be eligible to receive the dividend, when it is paid on the 6th of October.
The company's next dividend payment will be RM0.02 per share. Last year, in total, the company distributed RM0.06 to shareholders. Last year's total dividend payments show that Kerjaya Prospek Group Berhad has a trailing yield of 4.7% on the current share price of MYR1.28. If you buy this business for its dividend, you should have an idea of whether Kerjaya Prospek Group Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Kerjaya Prospek Group Berhad
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. Kerjaya Prospek Group Berhad paid out 75% of its earnings to investors last year, a normal payout level for most businesses. 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. Kerjaya Prospek Group Berhad paid out more free cash flow than it generated - 125%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Kerjaya Prospek Group Berhad does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Kerjaya Prospek Group Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Kerjaya Prospek Group Berhad's ability to maintain its dividend.