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Do These 3 Checks Before Buying Infoline Tec Group Berhad (KLSE:INFOTEC) For Its Upcoming Dividend

Infoline Tec Group Berhad (KLSE:INFOTEC) stock is about to trade ex-dividend in 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 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. Meaning, you will need to purchase Infoline Tec Group Berhad's shares before the 7th of December to receive the dividend, which will be paid on the 22nd of December.

The company's next dividend payment will be RM0.0094 per share, and in the last 12 months, the company paid a total of RM0.023 per share. Based on the last year's worth of payments, Infoline Tec Group Berhad stock has a trailing yield of around 2.8% on the current share price of MYR0.83. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Infoline Tec Group 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. Infoline Tec Group Berhad is paying out an acceptable 57% of its profit, a common payout level among 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. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Infoline Tec Group Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 57% a year over the past five years.

Unfortunately Infoline Tec Group Berhad has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

From a dividend perspective, should investors buy or avoid Infoline Tec Group Berhad? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. 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.

So if you want to do more digging on Infoline Tec Group Berhad, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 2 warning signs for Infoline Tec Group Berhad and you should be aware of these before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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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