We Wouldn't Be Too Quick To Buy LBI Capital Berhad (KLSE:LBICAP) Before It Goes Ex-Dividend

Simply Wall St
·3 min read

It looks like LBI Capital Berhad (KLSE:LBICAP) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase LBI Capital Berhad's shares before the 7th of December in order to receive the dividend, which the company will pay on the 23rd of December.

The company's next dividend payment will be RM0.02 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Based on the last year's worth of payments, LBI Capital Berhad has a trailing yield of 3.8% on the current stock price of MYR0.525. If you buy this business for its dividend, you should have an idea of whether LBI Capital Berhad's dividend is reliable and sustainable. As a result, readers should always check whether LBI Capital Berhad has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for LBI Capital 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. LBI Capital Berhad distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. LBI Capital Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 42% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. LBI Capital Berhad's dividend payments per share have declined at 2.2% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

From a dividend perspective, should investors buy or avoid LBI Capital Berhad? Not only are earnings per share shrinking, but LBI Capital Berhad is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. LBI Capital Berhad doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with LBI Capital Berhad. To help with this, we've discovered 4 warning signs for LBI Capital Berhad (1 is a bit concerning!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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