Readers hoping to buy Hap Seng Plantations Holdings Berhad (KLSE:HSPLANT) for its dividend will have to make its way shortly, as the stock is set to trade ex-dividend. Generally, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because any stock transaction must have settled before the record date to be eligible for a dividend. Thus, you can buy the shares of Hap Seng Plantations Holdings Berhad before September 8 in order to receive the dividend, which the company will pay on September 22.

The company’s next dividend payment will be RM0.05 per share. Last year, in total, the company distributed RM0.20 to shareholders. Over the past 12 months of distributions, Hap Seng Plantations Holdings Berhad has yielded approximately 9.3% on its current share price of MYR 2.2. If you’re buying this company for its dividend, you should get an idea of ​​the reliability and sustainability of Hap Seng Plantations Holdings Berhad’s dividend. We therefore need to consider whether Hap Seng Plantations Holdings Berhad can afford its dividend, and whether the dividend could increase.

Check out our latest analysis for Hap Seng Plantations Holdings Berhad

If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Hap Seng Plantations Holdings Berhad paid out more than half (52%) of its profits last year, which is a regular payout ratio for most companies. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. It distributed 44% of its free cash flow as dividends, a comfortable level of distribution for most companies.

It is positive to see Hap Seng Plantations Holdings Berhad’s dividend being covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend is cut.

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 consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. That’s why it’s heartening to see that Hap Seng Plantations Holdings Berhad’s revenue has skyrocketed, growing by 21% annually over the past five years. Management seems to strike a good balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, reinvested earnings and some earnings growth, Hap Seng Plantations Holdings Berhad could have good prospects for future dividend increases.

Most investors primarily gauge a company’s dividend prospects by checking the historical rate of dividend growth. It appears that Hap Seng Plantations Holdings Berhad’s dividends are largely the same as 10 years ago.

The essential

Is Hap Seng Plantations Holdings Berhad worth buying for its dividend? We appreciate Hap Seng Plantations Holdings Berhad’s earnings per share growth and the fact that, although its payout ratio is around average, it has paid out a lower percentage of its cash flow. There’s a lot to like about Hap Seng Plantations Holdings Berhad, and we’d prioritize a closer look.

With that in mind, an essential part of thorough stock research is being aware of all the risks that stocks currently face. Every business has risks, and we’ve spotted 2 warning signs for Hap Seng Plantations Holdings Berhad (1 of which can’t be ignored!) that you should know about.

As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.

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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.