Should Income Investors Look At Eupe Corporation Berhad (KLSE:EUPE) Before Its Ex-Dividend?
Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Eupe Corporation Berhad (KLSE:EUPE) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Eupe Corporation Berhad’s shares before the 28th of August in order to receive the dividend, which the company will pay on the 13th of September.
The company’s upcoming dividend is RM0.015 a share, following on from the last 12 months, when the company distributed a total of RM0.018 per share to shareholders. Looking at the last 12 months of distributions, Eupe Corporation Berhad has a trailing yield of approximately 1.7% on its current stock price of MYR0.885. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Eupe Corporation 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. Eupe Corporation Berhad has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether Eupe Corporation Berhad generated enough free cash flow to afford its dividend. Eupe Corporation Berhad paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Click here to see how much of its profit Eupe Corporation 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Eupe Corporation Berhad’s earnings per share have been growing at 19% a year for the past five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Eupe Corporation Berhad has seen its dividend decline 9.3% per annum on average over the past 10 years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Has Eupe Corporation Berhad got what it takes to maintain its dividend payments? We’re glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it’s not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it’s hard to get excited about Eupe Corporation Berhad from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Eupe Corporation Berhad has 3 warning signs (and 1 which is a bit concerning) we think you should know about.
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.
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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.