Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MCE Holdings Berhad (KLSE:MCEHLDG) is about to trade ex-dividend in the next day or so. 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 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, MCE Holdings Berhad investors that purchase the stock on or after the 13th of June will not receive the dividend, which will be paid on the 23rd of June.

The company's next dividend payment will be RM0.025 per share. Last year, in total, the company distributed RM0.05 to shareholders. Based on the last year's worth of payments, MCE Holdings Berhad has a trailing yield of 2.6% on the current stock price of MYR1.9. If you buy this business for its dividend, you should have an idea of whether MCE Holdings Berhad's dividend is reliable and sustainable. So we need to investigate whether MCE Holdings Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for MCE Holdings Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MCE Holdings Berhad has a low and conservative payout ratio of just 9.9% of its income after tax. MCE Holdings Berhad paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit MCE Holdings 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see MCE Holdings Berhad's earnings have been skyrocketing, up 52% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. MCE Holdings Berhad's dividend payments per share have declined at 1.8% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

From a dividend perspective, should investors buy or avoid MCE Holdings Berhad? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, MCE Holdings Berhad looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while MCE Holdings Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example - MCE Holdings Berhad has 3 warning signs we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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