Dividend Investors: Don’t Be Too Quick To Buy Power Root Berhad (KLSE:PWROOT) For Its Upcoming Dividend
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Berhad root power (KLSE:PWROOT) is set to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the deadline by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. This means you will need to buy Power Root Berhad shares by September 14 to receive the dividend, which will be paid on October 12.
The company’s next dividend payment will be RM0.03 per share, and over the past 12 months the company has paid a total of RM0.054 per share. Looking at the last 12 months of distributions, Power Root Berhad has a yield of around 3.8% on its current price of MYR 2.06. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! Therefore, readers should always check if Power Root Berhad was able to increase its dividend or if the dividend could be reduced.
Check out our latest analysis for Power Root Berhad
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Power Root Berhad paid out more than half (68%) of its profits last year, which is a regular payout ratio for most companies. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. Power Root Berhad paid out more free cash flow than it generated – 126%, to be precise – last year, which we believe is relatively high. It’s hard to consistently pay more money than you generate without borrowing or using company money, so we wonder how the company justifies this level of payment.
While Power Root Berhad’s dividends were covered by the company’s reported earnings, cash is a bit more important, so it’s not nice to see that the company didn’t generate enough cash to pay its dividend. . Cash is king, as they say, and if Power Root Berhad repeatedly pays dividends that are not well covered by cash flow, we would consider that a warning sign.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with declining profits are tricky from a dividend perspective. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. So we’re not too thrilled that Power Root Berhad’s revenue has declined by 4.3% annually over the past five years.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Power Root Berhad has recorded dividend growth of 9.0% per annum on average over the past 10 years. It’s interesting, but the combination of a growing dividend despite falling profits can usually only be achieved by paying out more of the company’s profits. It can be valuable to shareholders, but it can’t last forever.
Is Power Root Berhad an attractive dividend-paying stock, or is it best left on the shelf? Power Root Berhad had an average payout ratio, but its free cash flow was lower and earnings per share declined. Overall, it doesn’t seem like the most suitable dividend-paying stock for a long-term investor.
However, if you are still interested in Power Root Berhad and want to learn more, it will be very useful for you to know what risks this title faces. For example, we found 1 warning sign for Power Root Berhad which we recommend you consider before investing in the company.
A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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