Three Days Left To Buy United Plantations Berhad (KLSE:UTDPLT) Before The Ex-Dividend Date

Readers hoping to buy United Plantations Berhad (KLSE:UTDPLT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase United Plantations Berhad's shares on or after the 25th of April will not receive the dividend, which will be paid on the 9th of May.

The company's next dividend payment will be RM00.74 per share. Last year, in total, the company distributed RM1.13 to shareholders. Looking at the last 12 months of distributions, United Plantations Berhad has a trailing yield of approximately 5.0% on its current stock price of RM022.78. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Our free stock report includes 1 warning sign investors should be aware of before investing in United Plantations Berhad. Read for free now.

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. United Plantations Berhad paid out more than half (64%) of its earnings last year, which is a regular payout ratio for 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. The company paid out 96% 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.

United Plantations Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were United Plantations Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

View our latest analysis for United Plantations Berhad

Click here to see how much of its profit United Plantations Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

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. It's encouraging to see United Plantations Berhad has grown its earnings rapidly, up 20% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, United Plantations Berhad has increased its dividend at approximately 11% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Should investors buy United Plantations 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 96% of its cashflow, which is uncomfortably high. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of United Plantations Berhad's dividend merits.

With that being said, if dividends aren't your biggest concern with United Plantations Berhad, you should know about the other risks facing this business. To help with this, we've discovered 1 warning sign for United Plantations Berhad that you should be aware of before investing in their shares.

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.