Readers hoping to buy SKP Resources Bhd (KLSE:SKPRES) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase SKP Resources Bhd's shares on or after the 3rd of October, you won't be eligible to receive the dividend, when it is paid on the 24th of October.
The company's next dividend payment will be RM00.0292 per share. Last year, in total, the company distributed RM0.029 to shareholders. Based on the last year's worth of payments, SKP Resources Bhd has a trailing yield of 2.7% on the current stock price of RM01.09. 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 SKP Resources Bhd can afford its dividend, and if the dividend could grow.
View our latest analysis for SKP Resources Bhd
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. SKP Resources Bhd paid out a comfortable 47% of its profit last year. 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. Dividends consumed 73% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that SKP Resources Bhd'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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 SKP Resources Bhd's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.