Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wang-Zheng Berhad (KLSE:WANGZNG) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Wang-Zheng Berhad's shares before the 29th of August in order to be eligible for the dividend, which will be paid on the 18th of September.
The company's next dividend payment will be RM00.01 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Looking at the last 12 months of distributions, Wang-Zheng Berhad has a trailing yield of approximately 3.2% on its current stock price of RM00.63. 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.
View our latest analysis for Wang-Zheng Berhad
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. Wang-Zheng Berhad is paying out an acceptable 65% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Wang-Zheng Berhad generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Wang-Zheng 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 Wang-Zheng Berhad 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 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 Wang-Zheng Berhad's 14% 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.