Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see PWF Corporation Bhd. (KLSE:PWF) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, PWF Corporation Bhd investors that purchase the stock on or after the 27th of April will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be RM0.03 per share, on the back of last year when the company paid a total of RM0.05 to shareholders. Looking at the last 12 months of distributions, PWF Corporation Bhd has a trailing yield of approximately 9.2% on its current stock price of MYR0.65. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for PWF Corporation 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. PWF Corporation Bhd is paying out an acceptable 66% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 19% of its free cash flow last year.

It's positive to see that PWF Corporation 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 how much of its profit PWF Corporation Bhd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. PWF Corporation Bhd's earnings per share have fallen at approximately 11% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.