Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BP Plastics Holding Bhd. (KLSE:BPPLAS) is about to trade ex-dividend in the next three 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. 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. Meaning, you will need to purchase BP Plastics Holding Bhd's shares before the 21st of September to receive the dividend, which will be paid on the 12th of October.
The company's next dividend payment will be RM0.015 per share, on the back of last year when the company paid a total of RM0.055 to shareholders. Based on the last year's worth of payments, BP Plastics Holding Bhd stock has a trailing yield of around 4.3% on the current share price of MYR1.27. If you buy this business for its dividend, you should have an idea of whether BP Plastics Holding Bhd's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for BP Plastics Holding Bhd
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. BP Plastics Holding Bhd paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, BP Plastics Holding Bhd's earnings per share have been growing at 18% a year for the past five years. BP Plastics Holding Bhd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.