Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Atlan Holdings Bhd (KLSE:ATLAN) is about to trade ex-dividend in the next 3 days. 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Atlan Holdings Bhd's shares before the 25th of July in order to be eligible for the dividend, which will be paid on the 15th of August.
The company's next dividend payment will be RM00.01 per share, on the back of last year when the company paid a total of RM0.08 to shareholders. Based on the last year's worth of payments, Atlan Holdings Bhd has a trailing yield of 3.0% on the current stock price of RM02.70. 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 Atlan Holdings Bhd can afford its dividend, and if the dividend could grow.
View our latest analysis for Atlan Holdings Bhd
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Atlan Holdings Bhd paid out 124% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while Atlan Holdings Bhd's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Click here to see how much of its profit Atlan Holdings Bhd paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Atlan Holdings Bhd's earnings per share have dropped 12% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.