Income Investors Should Know That Sunway Construction Group Berhad (KLSE:SUNCON) Goes Ex-Dividend Soon

It looks like Sunway Construction Group Berhad (KLSE:SUNCON) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company’s books in order to receive a 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 Sunway Construction Group Berhad’s shares on or after the 9th of June will not receive the dividend, which will be paid on the 25th of June.

The company’s upcoming dividend is RM00.228 a share, following on from the last 12 months, when the company distributed a total of RM0.27 per share to shareholders. Calculating the last year’s worth of payments shows that Sunway Construction Group Berhad has a trailing yield of 6.2% on the current share price of RM07.25. If you buy this business for its dividend, you should have an idea of whether Sunway Construction Group Berhad’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Last year, Sunway Construction Group Berhad paid out 98% of its income as dividends, which is above a level that we’re comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether Sunway Construction Group Berhad generated enough free cash flow to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

It’s good to see that while Sunway Construction Group Berhad’s dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

See our latest analysis for Sunway Construction Group Berhad

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That’s why it’s comforting to see Sunway Construction Group Berhad’s earnings have been skyrocketing, up 40% per annum for the past five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Sunway Construction Group Berhad has delivered 27% dividend growth per year on average over the past 10 years. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Sunway Construction Group Berhad worth buying for its dividend? Sunway Construction Group Berhad has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. Overall, it’s hard to get excited about Sunway Construction Group Berhad from a dividend perspective.

If you’re not too concerned about Sunway Construction Group Berhad’s ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we’ve identified 1 warning sign with Sunway Construction Group Berhad and understanding them should be part of your investment process.

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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.