Homeritz Corporation Berhad (KLSE:HOMERIZ) 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Homeritz Corporation Berhad's shares before the 13th of February in order to be eligible for the dividend, which will be paid on the 7th of March.
The company's next dividend payment will be RM00.017 per share, on the back of last year when the company paid a total of RM0.017 to shareholders. Based on the last year's worth of payments, Homeritz Corporation Berhad stock has a trailing yield of around 2.7% on the current share price of RM00.62. If you buy this business for its dividend, you should have an idea of whether Homeritz Corporation Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Homeritz Corporation Berhad
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Homeritz Corporation Berhad is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Homeritz Corporation Berhad generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.
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 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Homeritz Corporation Berhad, with earnings per share up 5.5% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.