LTKM Berhad (KLSE:LTKM) Passed Our Checks, And It's About To Pay A RM00.02 Dividend
Readers hoping to buy LTKM Berhad (KLSE:LTKM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase LTKM Berhad's shares on or after the 25th of September will not receive the dividend, which will be paid on the 10th of October.
The company's upcoming dividend is RM00.02 a share, following on from the last 12 months, when the company distributed a total of RM0.06 per share to shareholders. Calculating the last year's worth of payments shows that LTKM Berhad has a trailing yield of 3.6% on the current share price of RM01.66. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. LTKM Berhad is paying out just 10% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 12% of its free cash flow in the last year.
It's positive to see that LTKM 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.
Check out our latest analysis for LTKM Berhad
Click here to see how much of its profit LTKM Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see LTKM Berhad has grown its earnings rapidly, up 55% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, LTKM Berhad looks like a promising growth company.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. LTKM Berhad's dividend payments per share have declined at 1.1% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Should investors buy LTKM Berhad for the upcoming dividend? It's great that LTKM Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about LTKM Berhad, and we would prioritise taking a closer look at it.
While it's tempting to invest in LTKM Berhad for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for LTKM Berhad and you should be aware of these before buying any shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.