It looks like Sime Darby Plantation Berhad (KLSE:SIMEPLT) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Sime Darby Plantation Berhad investors that purchase the stock on or after the 3rd of May will not receive the dividend, which will be paid on the 20th of May.
The company's upcoming dividend is RM00.0605 a share, following on from the last 12 months, when the company distributed a total of RM0.065 per share to shareholders. Looking at the last 12 months of distributions, Sime Darby Plantation Berhad has a trailing yield of approximately 2.1% on its current stock price of RM04.43. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Sime Darby Plantation Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Sime Darby Plantation Berhad paying out a modest 35% of its earnings. 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 more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Sime Darby Plantation Berhad's earnings have been skyrocketing, up 25% per annum for the past five years.