Should You Buy DKLS Industries Berhad (KLSE:DKLS) For Its Upcoming Dividend?
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 DKLS Industries Berhad (KLSE:DKLS) is about to go ex-dividend in just 2 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase DKLS Industries Berhad's shares before the 30th of July in order to receive the dividend, which the company will pay on the 14th of August.
The company's next dividend payment will be RM00.03 per share, and in the last 12 months, the company paid a total of RM0.03 per share. Based on the last year's worth of payments, DKLS Industries Berhad has a trailing yield of 1.7% on the current stock price of RM01.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether DKLS Industries Berhad has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. DKLS Industries Berhad is paying out just 13% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 7.6% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that DKLS Industries 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.
See our latest analysis for DKLS Industries Berhad
Click here to see how much of its profit DKLS Industries Berhad paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see DKLS Industries Berhad's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DKLS Industries Berhad's dividend payments are effectively flat on where they were 10 years ago.
Final Takeaway
Is DKLS Industries Berhad an attractive dividend stock, or better left on the shelf? DKLS Industries Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks DKLS Industries Berhad is facing. We've identified 2 warning signs with DKLS Industries Berhad (at least 1 which doesn't sit too well with us), and understanding these should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.