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 Able Global Berhad (KLSE:ABLEGLOB) is about to go ex-dividend in just 4 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. Meaning, you will need to purchase Able Global Berhad's shares before the 12th of March to receive the dividend, which will be paid on the 29th of March.

The company's next dividend payment will be RM00.02 per share, on the back of last year when the company paid a total of RM0.065 to shareholders. Based on the last year's worth of payments, Able Global Berhad stock has a trailing yield of around 3.8% on the current share price of RM01.70. If you buy this business for its dividend, you should have an idea of whether Able Global Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Able Global Berhad

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Able Global Berhad paying out a modest 38% of its earnings. 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. Luckily it paid out just 21% of its free cash flow 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. This is why it's a relief to see Able Global Berhad earnings per share are up 7.7% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Able Global Berhad has increased its dividend at approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Able Global Berhad? Earnings per share have been growing moderately, and Able Global Berhad is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Able Global Berhad is halfway there. There's a lot to like about Able Global Berhad, and we would prioritise taking a closer look at it.

While it's tempting to invest in Able Global Berhad for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Able Global Berhad and understanding them should be part of your investment process.

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.