Is It Smart To Buy Binastra Corporation Berhad (KLSE:BNASTRA) Before It Goes Ex-Dividend?
It looks like Binastra Corporation Berhad (KLSE:BNASTRA) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Binastra Corporation Berhad investors that purchase the stock on or after the 2nd of October will not receive the dividend, which will be paid on the 16th of October.
The company's next dividend payment will be RM00.04 per share, on the back of last year when the company paid a total of RM0.08 to shareholders. Based on the last year's worth of payments, Binastra Corporation Berhad has a trailing yield of 3.2% on the current stock price of RM02.50. If you buy this business for its dividend, you should have an idea of whether Binastra Corporation Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are 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. Fortunately Binastra Corporation Berhad's payout ratio is modest, at just 49% of profit. A useful secondary check can be to evaluate whether Binastra Corporation Berhad generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (76%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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.
See our latest analysis for Binastra Corporation Berhad
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Binastra Corporation Berhad has grown its earnings rapidly, up 39% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Binastra Corporation Berhad has delivered an average of 63% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy Binastra Corporation Berhad for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Binastra Corporation Berhad paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks Binastra Corporation Berhad is facing. To that end, you should learn about the 2 warning signs we've spotted with Binastra Corporation Berhad (including 1 which is a bit concerning).
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.