Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ajinomoto (Malaysia) Berhad (KLSE:AJI) is about to trade ex-dividend in the next 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. Meaning, you will need to purchase Ajinomoto (Malaysia) Berhad's shares before the 29th of August to receive the dividend, which will be paid on the 25th of September.
The company's next dividend payment will be RM00.384 per share, on the back of last year when the company paid a total of RM0.38 to shareholders. Looking at the last 12 months of distributions, Ajinomoto (Malaysia) Berhad has a trailing yield of approximately 2.6% on its current stock price of RM014.54. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Ajinomoto (Malaysia) 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. Ajinomoto (Malaysia) Berhad paid out just 5.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last 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 Ajinomoto (Malaysia) Berhad paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Ajinomoto (Malaysia) Berhad's earnings have been skyrocketing, up 48% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Ajinomoto (Malaysia) Berhad looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ajinomoto (Malaysia) Berhad has delivered 6.7% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy Ajinomoto (Malaysia) Berhad for the upcoming dividend? Ajinomoto (Malaysia) Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Ajinomoto (Malaysia) Berhad (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.