AME Elite Consortium Berhad (KLSE:AME) stock is about to trade ex-dividend in 3 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 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. Accordingly, AME Elite Consortium Berhad investors that purchase the stock on or after the 14th of December will not receive the dividend, which will be paid on the 5th of January.
The company's next dividend payment will be RM0.02 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Looking at the last 12 months of distributions, AME Elite Consortium Berhad has a trailing yield of approximately 1.3% on its current stock price of MYR1.56. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
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. Fortunately AME Elite Consortium Berhad's payout ratio is modest, at just 34% of profit. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow last year.
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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see AME Elite Consortium Berhad earnings per share are up 9.8% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the AME Elite Consortium Berhad dividends are largely the same as they were three years ago.
To Sum It Up
Is AME Elite Consortium Berhad an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and AME Elite Consortium Berhad is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and AME Elite Consortium Berhad is halfway there. AME Elite Consortium Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in AME Elite Consortium Berhad for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for AME Elite Consortium Berhad you should be aware of.
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.