Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TSH Resources Berhad (KLSE:TSH) is about to go ex-dividend in just 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 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 TSH Resources Berhad's shares before the 5th of December to receive the dividend, which will be paid on the 20th of December.
The company's next dividend payment will be RM00.025 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, TSH Resources Berhad has a trailing yield of approximately 4.2% on its current stock price of RM01.20. If you buy this business for its dividend, you should have an idea of whether TSH Resources Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for TSH Resources 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. TSH Resources Berhad paid out more than half (69%) of its earnings last year, which is a regular payout ratio for 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 23% of its free cash flow last year.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see TSH Resources Berhad's earnings per share have risen 20% per annum over the last five years. TSH Resources Berhad is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. 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.