Master-Pack Group Berhad (KLSE:MASTER) could be worth buying for its upcoming dividend

Master-Pack Berhad Group (KLSE:MASTER) is set to go ex-dividend in the next three 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 an important date to remember as any share purchases made on or after this date could result in a later settlement that will not be shown on the record date. This means you will need to purchase Master-Pack Group Berhad shares before August 8th to receive the dividend, which will be paid on August 30th.

The company’s next dividend payment will be RM00.06 per share. Last year, the company paid a total of RM0.16 to shareholders. Based on last year’s dividend payments, Master-Pack Group Berhad shares have a yield of around 4.0% at the current share price of RM04.03. Dividends are an important source of income for many shareholders, but the health of the business is key to maintaining those dividends. So we need to see if the dividend payments are being covered and if earnings are growing.

Check out our latest analysis for Master-Pack Group Berhad

If a company pays out more in dividends than it earns, the dividend could become unsustainable – not an ideal situation. That’s why it’s good to see that Master-Pack Group Berhad pays out a modest 28% of its profits. However, cash flow is typically more important than profit when assessing the sustainability of a dividend, so we should always check whether the company generated enough cash to afford the dividend. Last year, it paid out 20% of its free cash flow as dividends, which is conservatively low.

It’s positive that Master-Pack Group Berhad’s dividend is covered by both profits and cash flow, as this usually indicates stability of the company, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much profit Master-Pack Group Berhad paid out over the last 12 months.

Are profits and dividends growing?

Companies with strong growth prospects tend to be the best dividend payers, because it is easier to increase dividends when earnings per share are rising. If the business enters a recession and the dividend is cut, the company could see its value fall sharply. It is therefore encouraging to see that Master-Pack Group Berhad’s earnings have been growing rapidly, at 36% per year over the past five years. Master-Pack Group Berhad is paying out less than half of its earnings and cash flow, while growing earnings per share rapidly. This is a very good combination and can often lead to a multiplying dividend over the long term if earnings are rising and the company is paying out a higher percentage of its earnings.

The main way most investors assess a company’s dividend prospects is to look at the historical rate of dividend growth. Master-Pack Group Berhad has delivered an average of 23% annual dividend growth, based on the last 10 years of dividend payments. Excitingly, both earnings and dividends per share have been growing rapidly over the past few years.

Summary

Is Master-Pack Group Berhad an attractive dividend stock, or should it be shelved? It’s great that Master-Pack Group Berhad is growing earnings per share while paying out a low percentage of its profits and cash flow. It’s disappointing to see that the dividend has been cut at least once in the past, but in the current climate, the low payout ratio suggests a conservative approach to dividends, which we like. Master-Pack Group Berhad looks solid on this analysis, and we’d definitely consider investigating it further.

So, while Master-Pack Group Berhad looks good from a dividend perspective, it is always worth keeping an eye on the risks associated with this stock. Our analysis shows, 2 Warning Signs for Master-Pack Group Berhad and you should be aware of this before you buy any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find full list of high yielding dividend stocks.

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This Simply Wall St article is for general information purposes only. Our commentary is based solely on historical data and analyst forecasts, and is based on an objective methodology. Our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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