Just Four Days Till Magni-Tech Industries Berhad (KLSE:MAGNI) Will Be Trading Ex-Dividend
Magni-Tech Industries Berhad (KLSE:MAGNI) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase Magni-Tech Industries Berhad's shares on or after the 2nd of April, you won't be eligible to receive the dividend, when it is paid on the 18th of April.
The company's next dividend payment will be RM00.035 per share, on the back of last year when the company paid a total of RM0.09 to shareholders. Looking at the last 12 months of distributions, Magni-Tech Industries Berhad has a trailing yield of approximately 4.1% on its current stock price of RM02.22. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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 Magni-Tech Industries Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Magni-Tech Industries Berhad's payout ratio is modest, at just 40% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 239% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Magni-Tech Industries Berhad intends to continue funding this dividend, or if it could be forced to cut the payment.
Magni-Tech Industries Berhad does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
Magni-Tech Industries 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 Magni-Tech Industries Berhad's ability to maintain its dividend.
Click here to see how much of its profit Magni-Tech Industries Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Magni-Tech Industries Berhad, with earnings per share up 5.6% 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Magni-Tech Industries Berhad has delivered 13% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Magni-Tech Industries Berhad worth buying for its dividend? Magni-Tech Industries Berhad delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 239% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Magni-Tech Industries Berhad's dividend merits.
However if you're still interested in Magni-Tech Industries Berhad as a potential investment, you should definitely consider some of the risks involved with Magni-Tech Industries Berhad. For example, Magni-Tech Industries Berhad has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
