It looks like Powerwell Holdings Berhad (KLSE:PWRWELL) is about to go ex-dividend in the next two 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. In other words, investors can purchase Powerwell Holdings Berhad's shares before the 15th of July in order to be eligible for the dividend, which will be paid on the 30th of July.
The company's next dividend payment will be RM00.01 per share, on the back of last year when the company paid a total of RM0.028 to shareholders. Looking at the last 12 months of distributions, Powerwell Holdings Berhad has a trailing yield of approximately 5.4% on its current stock price of RM00.56. If you buy this business for its dividend, you should have an idea of whether Powerwell Holdings Berhad's dividend is reliable and sustainable. So we need to investigate whether Powerwell Holdings Berhad can afford its dividend, and if the dividend could grow.
View our latest analysis for Powerwell Holdings 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. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 6.4% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Powerwell Holdings Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Powerwell Holdings Berhad earnings per share are up 6.6% per annum over the last five years. Decent historical earnings per share growth suggests Powerwell Holdings Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.