Celcomdigi Berhad (KLSE:CDB) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day 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. 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 Celcomdigi Berhad's shares before the 5th of December in order to be eligible for the dividend, which will be paid on the 23rd of December.
The company's upcoming dividend is RM00.036 a share, following on from the last 12 months, when the company distributed a total of RM0.14 per share to shareholders. Looking at the last 12 months of distributions, Celcomdigi Berhad has a trailing yield of approximately 4.0% on its current stock price of RM03.58. 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 check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Celcomdigi Berhad
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Celcomdigi Berhad paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Celcomdigi Berhad generated enough free cash flow to afford its dividend. Celcomdigi Berhad paid out more free cash flow than it generated - 111%, 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.
Cash is slightly more important than profit from a dividend perspective, but given Celcomdigi Berhad's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Celcomdigi Berhad's 6.6% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.