Yahoo Finance Don't Race Out To Buy Seng Fong Holdings Berhad (KLSE:SENFONG) Just Because It's Going Ex-Dividend
It looks like Seng Fong Holdings Berhad (KLSE:SENFONG) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Seng Fong Holdings Berhad's shares before the 14th of September in order to be eligible for the dividend, which will be paid on the 6th of October.
The company's upcoming dividend is RM0.005 a share, following on from the last 12 months, when the company distributed a total of RM0.02 per share to shareholders. Last year's total dividend payments show that Seng Fong Holdings Berhad has a trailing yield of 2.8% on the current share price of MYR0.715. If you buy this business for its dividend, you should have an idea of whether Seng Fong Holdings Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Seng Fong Holdings Berhad has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Seng Fong Holdings Berhad
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Seng Fong Holdings Berhad paid out more than half (69%) of its earnings last year, which is a regular payout ratio for most companies. 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. Seng Fong Holdings Berhad paid out more free cash flow than it generated - 140%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Seng Fong Holdings Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Seng Fong Holdings Berhad's ability to maintain its dividend.
Click here to see how much of its profit Seng Fong Holdings Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Seng Fong Holdings Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 43% a year over the past five years.
We'd also point out that Seng Fong Holdings Berhad issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Given that Seng Fong Holdings Berhad has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Has Seng Fong Holdings Berhad got what it takes to maintain its dividend payments? Seng Fong Holdings Berhad had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Seng Fong Holdings Berhad.
Although, if you're still interested in Seng Fong Holdings Berhad and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 3 warning signs for Seng Fong Holdings Berhad you should know about.
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.
