Keyfield International Berhad (KLSE:KEYFIELD) stock is about to trade ex-dividend in 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. This means that investors who purchase Keyfield International Berhad's shares on or after the 29th of August will not receive the dividend, which will be paid on the 13th of September.
The company's next dividend payment will be RM00.03 per share. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Keyfield International Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Keyfield International Berhad has a low and conservative payout ratio of just 23% of its income after tax. A useful secondary check can be to evaluate whether Keyfield International Berhad generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the 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 the company's payout ratio, plus analyst estimates of its future dividends.
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. 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's why it's comforting to see Keyfield International Berhad's earnings have been skyrocketing, up 51% per annum for the past five years. Keyfield International Berhad looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Keyfield International Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.