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It looks like Bank Islam Malaysia Berhad (KLSE:BIMB) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Bank Islam Malaysia Berhad investors that purchase the stock on or after the 14th of April will not receive the dividend, which will be paid on the 12th of May.
The company's next dividend payment will be RM0.034 per share. Last year, in total, the company distributed RM0.10 to shareholders. Last year's total dividend payments show that Bank Islam Malaysia Berhad has a trailing yield of 6.4% on the current share price of MYR2.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Bank Islam Malaysia Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank Islam Malaysia Berhad is paying out an acceptable 60% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Bank Islam Malaysia Berhad's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Given that Bank Islam Malaysia Berhad has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Final Takeaway
Should investors buy Bank Islam Malaysia Berhad for the upcoming dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.