In This Article:
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Scientex Berhad (KLSE:SCIENTX) is about to go ex-dividend in just 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. 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. Meaning, you will need to purchase Scientex Berhad's shares before the 23rd of December to receive the dividend, which will be paid on the 9th of January.
The company's upcoming dividend is RM0.05 a share, following on from the last 12 months, when the company distributed a total of RM0.09 per share to shareholders. Based on the last year's worth of payments, Scientex Berhad stock has a trailing yield of around 2.8% on the current share price of MYR3.26. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Scientex Berhad can afford its dividend, and if the dividend could grow.
View our latest analysis for Scientex Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Scientex Berhad paid out a comfortable 34% of its profit last year. A useful secondary check can be to evaluate whether Scientex Berhad generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Scientex 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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Scientex Berhad earnings per share are up 7.9% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. 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.