It looks like CEKD Berhad (KLSE:CEKD) is about to go ex-dividend in the next 3 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. 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, CEKD Berhad investors that purchase the stock on or after the 29th of August will not receive the dividend, which will be paid on the 27th of September.
The company's upcoming dividend is RM00.0075 a share, following on from the last 12 months, when the company distributed a total of RM0.02 per share to shareholders. Based on the last year's worth of payments, CEKD Berhad stock has a trailing yield of around 4.2% on the current share price of RM00.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether CEKD Berhad has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for CEKD 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. CEKD Berhad paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether CEKD Berhad generated enough free cash flow to afford its dividend. CEKD Berhad paid out more free cash flow than it generated - 168%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
CEKD 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.
CEKD 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 CEKD Berhad's ability to maintain its dividend.
Click here to see how much of its profit CEKD Berhad paid out over the last 12 months.