Favelle Favco Berhad (KLSE:FAVCO) Is About To Go Ex-Dividend, And It Pays A 5.3% Yield
Readers hoping to buy Favelle Favco Berhad (KLSE:FAVCO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Favelle Favco Berhad's shares on or after the 20th of August will not receive the dividend, which will be paid on the 9th of September.
The company's next dividend payment will be RM00.09 per share, and in the last 12 months, the company paid a total of RM0.09 per share. Based on the last year's worth of payments, Favelle Favco Berhad has a trailing yield of 5.3% on the current stock price of RM01.71. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Favelle Favco Berhad paid out a comfortable 50% of its profit last year. 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. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
Check out our latest analysis for Favelle Favco Berhad
Click here to see how much of its profit Favelle Favco Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Favelle Favco Berhad's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Favelle Favco Berhad's dividend payments per share have declined at 5.0% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Should investors buy Favelle Favco Berhad for the upcoming dividend? Earnings per share are down very slightly in recent times, and Favelle Favco Berhad paid out less half its profit and more than half its cash flow as dividends, which is not the worst combination but could be better. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
If you want to look further into Favelle Favco Berhad, it's worth knowing the risks this business faces. Case in point: We've spotted 2 warning signs for Favelle Favco Berhad you should be aware of.
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.