Yahoo Finance Far East Holdings Berhad (KLSE:FAREAST) Will Pay A RM00.06 Dividend In Three Days
Far East Holdings Berhad (KLSE:FAREAST) is about to trade ex-dividend in the next 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, Far East Holdings Berhad investors that purchase the stock on or after the 20th of June will not receive the dividend, which will be paid on the 5th of July.
The company's upcoming dividend is RM00.06 a share, following on from the last 12 months, when the company distributed a total of RM0.11 per share to shareholders. Calculating the last year's worth of payments shows that Far East Holdings Berhad has a trailing yield of 3.0% on the current share price of RM03.70. 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.
View our latest analysis for Far East Holdings 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. Far East Holdings Berhad paid out 59% of its earnings to investors last year, a normal payout level for most businesses. 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. The company paid out 105% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
Far East Holdings 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 Far East Holdings Berhad's ability to maintain its dividend.
Click here to see how much of its profit Far East Holdings Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Far East Holdings Berhad's earnings per share have been growing at 17% a year for the past five years. Earnings have been growing at a decent 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. Far East Holdings Berhad has delivered 5.3% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Far East Holdings Berhad is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Far East Holdings Berhad for the upcoming dividend? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 105% of its cashflow, which is uncomfortably high. To summarise, Far East Holdings Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.
With that being said, if dividends aren't your biggest concern with Far East Holdings Berhad, you should know about the other risks facing this business. For example, we've found 1 warning sign for Far East Holdings Berhad that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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