Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see New Hoong Fatt Holdings Berhad (KLSE:NHFATT) is about to trade ex-dividend in the next three 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. Therefore, if you purchase New Hoong Fatt Holdings Berhad's shares on or after the 22nd of June, you won't be eligible to receive the dividend, when it is paid on the 14th of July.
The company's upcoming dividend is RM0.10 a share, following on from the last 12 months, when the company distributed a total of RM0.13 per share to shareholders. Based on the last year's worth of payments, New Hoong Fatt Holdings Berhad stock has a trailing yield of around 4.5% on the current share price of MYR2.9. 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.
Check out our latest analysis for New Hoong Fatt Holdings 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 New Hoong Fatt Holdings Berhad paying out a modest 32% 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. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.
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 how much of its profit New Hoong Fatt Holdings Berhad paid out over the last 12 months.
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. For this reason, we're glad to see New Hoong Fatt Holdings Berhad's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.