Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) is about to trade ex-dividend in the next 3 days. 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. Accordingly, Lysaght Galvanized Steel Berhad investors that purchase the stock on or after the 28th of November will not receive the dividend, which will be paid on the 9th of December.
The company's next dividend payment will be RM00.35 per share. Last year, in total, the company distributed RM0.16 to shareholders. Last year's total dividend payments show that Lysaght Galvanized Steel Berhad has a trailing yield of 4.8% on the current share price of RM03.36. If you buy this business for its dividend, you should have an idea of whether Lysaght Galvanized Steel Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Lysaght Galvanized Steel 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. That's why it's good to see Lysaght Galvanized Steel Berhad paying out a modest 38% of its earnings. 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. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Lysaght Galvanized Steel 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 Lysaght Galvanized Steel Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Lysaght Galvanized Steel Berhad earnings per share are up 9.4% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.