Should You Buy KPJ Healthcare Berhad (KLSE:KPJ) For Its Upcoming Dividend?

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10 hours ago

Readers hoping to buy KPJ Healthcare Berhad (KLSE:KPJ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, KPJ Healthcare Berhad investors that purchase the stock on or after the 19th of June will not receive the dividend, which will be paid on the 11th of July.
The company's next dividend payment will be RM00.008 per share, and in the last 12 months, the company paid a total of RM0.041 per share. Looking at the last 12 months of distributions, KPJ Healthcare Berhad has a trailing yield of approximately 1.5% on its current stock price of RM02.79. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether KPJ Healthcare Berhad has been able to grow its dividends, or if the dividend might be cut.
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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. KPJ Healthcare Berhad is paying out an acceptable 54% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.
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.
View our latest analysis for KPJ Healthcare Berhad
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at KPJ Healthcare Berhad, with earnings per share up 9.3% on average over the last five years. Decent historical earnings per share growth suggests KPJ Healthcare Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, KPJ Healthcare Berhad has increased its dividend at approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has KPJ Healthcare Berhad got what it takes to maintain its dividend payments? Earnings per share growth has been modest and KPJ Healthcare Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. All things considered, we are not particularly enthused about KPJ Healthcare Berhad from a dividend perspective.
Wondering what the future holds for KPJ Healthcare Berhad? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.