Readers hoping to buy Magni-Tech Industries Berhad (KLSE:MAGNI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Magni-Tech Industries Berhad's shares before the 24th of March to receive the dividend, which will be paid on the 12th of April.
The company's next dividend payment will be RM0.02 per share, and in the last 12 months, the company paid a total of RM0.10 per share. Looking at the last 12 months of distributions, Magni-Tech Industries Berhad has a trailing yield of approximately 5.7% on its current stock price of MYR1.76. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's 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. That's why it's good to see Magni-Tech Industries Berhad paying out a modest 40% of its earnings. A useful secondary check can be to evaluate whether Magni-Tech Industries Berhad generated enough free cash flow to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past 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.
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?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Magni-Tech Industries Berhad's earnings are down 4.3% a year over the past five years.
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 17% dividend growth per year on average over the past 10 years.
The Bottom Line
Has Magni-Tech Industries Berhad got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Magni-Tech Industries Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.