It looks like United Malacca Berhad (KLSE:UMCCA) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase United Malacca Berhad's shares on or after the 18th of January, you won't be eligible to receive the dividend, when it is paid on the 31st of January.

The company's next dividend payment will be RM0.05 per share, and in the last 12 months, the company paid a total of RM0.12 per share. Last year's total dividend payments show that United Malacca Berhad has a trailing yield of 2.4% on the current share price of MYR5. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for United Malacca 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. United Malacca Berhad paid out 67% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether United Malacca Berhad generated enough free cash flow to afford its dividend. It paid out 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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. With that in mind, we're encouraged by the steady growth at United Malacca Berhad, with earnings per share up 8.4% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. United Malacca Berhad's dividend payments per share have declined at 5.4% per year on average over the past 10 years, which is uninspiring. United Malacca Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Has United Malacca Berhad got what it takes to maintain its dividend payments? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. To summarise, United Malacca Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you want to look further into United Malacca Berhad, it's worth knowing the risks this business faces. Case in point: We've spotted 2 warning signs for United Malacca Berhad 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.

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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.