Income Investors Should Know That Paramount Corporation Berhad (KLSE:PARAMON) Goes Ex-Dividend Soon

Paramount Corporation Berhad (KLSE:PARAMON) stock is about to trade ex-dividend in four 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. 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. Thus, you can purchase Paramount Corporation Berhad's shares before the 12th of March in order to receive the dividend, which the company will pay on the 27th of March.

The company's next dividend payment will be RM00.04 per share, and in the last 12 months, the company paid a total of RM0.07 per share. Calculating the last year's worth of payments shows that Paramount Corporation Berhad has a trailing yield of 6.4% on the current share price of RM01.10. 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 investigate whether Paramount Corporation Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Paramount 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. Paramount Corporation Berhad paid out 53% of its earnings to investors last year, a normal payout level for most businesses. 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. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.

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.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Paramount Corporation Berhad earnings per share are up 5.6% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Paramount Corporation Berhad has lifted its dividend by approximately 2.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Paramount Corporation Berhad got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Paramount Corporation Berhad paid out a bit over half of its earnings and free cash flow last year. Overall, it's hard to get excited about Paramount Corporation Berhad from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Paramount Corporation Berhad, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Paramount Corporation Berhad and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.