It looks like Matrix Concepts Holdings Berhad (KLSE:MATRIX) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. Thus, you can purchase Matrix Concepts Holdings Berhad's shares before the 22nd of December in order to receive the dividend, which the company will pay on the 12th of January.

The company's next dividend payment will be RM0.02 per share, on the back of last year when the company paid a total of RM0.083 to shareholders. Last year's total dividend payments show that Matrix Concepts Holdings Berhad has a trailing yield of 5.5% on the current share price of MYR1.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Matrix Concepts Holdings Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Matrix Concepts 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. Matrix Concepts Holdings Berhad paid out 57% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Matrix Concepts Holdings Berhad generated enough free cash flow to afford its dividend. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Matrix Concepts Holdings Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Matrix Concepts Holdings Berhad's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Matrix Concepts Holdings Berhad's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Matrix Concepts Holdings Berhad's dividend payments are broadly unchanged compared to where they were nine years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid Matrix Concepts Holdings Berhad? Matrix Concepts Holdings Berhad is paying out a reasonable percentage of its income yet an uncomfortably high 116% of its cash flow as dividends. What's more, earnings have barely grown. It's not that we think Matrix Concepts Holdings Berhad is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Matrix Concepts Holdings Berhad and want to know more, you'll find it very useful to know what risks this stock faces. For example - Matrix Concepts Holdings Berhad has 1 warning sign 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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