Four Days Left To Buy Luxchem Corporation Berhad (KLSE:LUXCHEM) Before The Ex-Dividend Date

Luxchem Corporation Berhad (KLSE:LUXCHEM) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Luxchem Corporation Berhad's shares on or after the 6th of March will not receive the dividend, which will be paid on the 21st of March.

The company's next dividend payment will be RM00.008 per share. Last year, in total, the company distributed RM0.014 to shareholders. Last year's total dividend payments show that Luxchem Corporation Berhad has a trailing yield of 2.7% on the current share price of RM00.515. If you buy this business for its dividend, you should have an idea of whether Luxchem Corporation Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Luxchem Corporation Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Luxchem Corporation Berhad paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Luxchem Corporation Berhad generated enough free cash flow to afford its dividend. Fortunately, it paid out only 32% of its free cash flow in the past year.

It's positive to see that Luxchem Corporation Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Luxchem Corporation Berhad's earnings per share have been shrinking at 4.7% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Luxchem Corporation Berhad's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

To Sum It Up

Has Luxchem Corporation Berhad got what it takes to maintain its dividend payments? Luxchem Corporation Berhad has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Luxchem 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 - Luxchem Corporation Berhad has 1 warning sign we think you should be aware of.

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.