Yahoo Finance Don't Race Out To Buy Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) Just Because It's Going Ex-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 Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 Carlsberg Brewery Malaysia Berhad's shares before the 24th of May in order to receive the dividend, which the company will pay on the 8th of June.
The company's next dividend payment will be RM0.21 per share, and in the last 12 months, the company paid a total of RM0.88 per share. Looking at the last 12 months of distributions, Carlsberg Brewery Malaysia Berhad has a trailing yield of approximately 4.1% on its current stock price of MYR21.7. If you buy this business for its dividend, you should have an idea of whether Carlsberg Brewery Malaysia Berhad's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Carlsberg Brewery Malaysia Berhad
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. It paid out 86% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Carlsberg Brewery Malaysia Berhad generated enough free cash flow to afford its dividend. Carlsberg Brewery Malaysia Berhad paid out more free cash flow than it generated - 133%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
While Carlsberg Brewery Malaysia Berhad's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Carlsberg Brewery Malaysia Berhad's ability to maintain its dividend.
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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Carlsberg Brewery Malaysia Berhad, with earnings per share up 7.0% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Carlsberg Brewery Malaysia Berhad has delivered 2.0% dividend growth per year on average over the past 10 years.
The Bottom Line
Is Carlsberg Brewery Malaysia Berhad worth buying for its dividend? Carlsberg Brewery Malaysia Berhad is paying out a reasonable percentage of its income and an uncomfortably high 133% of its cash flow as dividends. At least earnings per share have been growing steadily. It's not that we think Carlsberg Brewery Malaysia Berhad is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
So if you're still interested in Carlsberg Brewery Malaysia Berhad despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for Carlsberg Brewery Malaysia Berhad (1 is significant!) that deserve your attention before investing in the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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