Readers hoping to buy Luxchem Corporation Berhad (KLSE:LUXCHEM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Luxchem Corporation Berhad's shares before the 13th of April in order to be eligible for the dividend, which will be paid on the 12th of May.
The company's next dividend payment will be RM0.01 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Looking at the last 12 months of distributions, Luxchem Corporation Berhad has a trailing yield of approximately 4.0% on its current stock price of MYR0.505. 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 Luxchem Corporation 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. That's why it's good to see Luxchem Corporation Berhad paying out a modest 47% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Luxchem Corporation Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Luxchem Corporation Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Luxchem Corporation Berhad's earnings per share have been shrinking at 2.6% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Luxchem Corporation Berhad has lifted its dividend by approximately 4.2% a year on average.