It looks like Lingkaran Trans Kota Holdings Berhad (KLSE:LITRAK) is about to go 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. 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. Thus, you can purchase Lingkaran Trans Kota Holdings Berhad's shares before the 10th of November in order to receive the dividend, which the company will pay on the 18th of November.

The upcoming dividend for Lingkaran Trans Kota Holdings Berhad will put a total of RM4.57 per share in shareholders' pockets, up from last year's total dividends of RM0.30. 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.

Check out our latest analysis for Lingkaran Trans Kota Holdings Berhad

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Lingkaran Trans Kota Holdings Berhad paid out 50% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Lingkaran Trans Kota Holdings Berhad generated enough free cash flow to afford its dividend. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Lingkaran Trans Kota Holdings Berhad'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 Lingkaran Trans Kota Holdings Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Lingkaran Trans Kota Holdings Berhad's 6.8% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Lingkaran Trans Kota Holdings Berhad has delivered 5.8% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

Is Lingkaran Trans Kota Holdings Berhad an attractive dividend stock, or better left on the shelf? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Lingkaran Trans Kota Holdings Berhad from a dividend perspective.

If you want to look further into Lingkaran Trans Kota Holdings Berhad, it's worth knowing the risks this business faces. Our analysis shows 1 warning sign for Lingkaran Trans Kota Holdings Berhad and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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