Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) is about to trade ex-dividend in the next 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Mr D.I.Y. Group (M) Berhad's shares before the 30th of May to receive the dividend, which will be paid on the 23rd of June.

The company's upcoming dividend is RM0.006 a share, following on from the last 12 months, when the company distributed a total of RM0.022 per share to shareholders. Calculating the last year's worth of payments shows that Mr D.I.Y. Group (M) Berhad has a trailing yield of 1.4% on the current share price of MYR1.62. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Mr D.I.Y. Group (M) Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Mr D.I.Y. Group (M) Berhad paying out a modest 44% of its earnings. A useful secondary check can be to evaluate whether Mr D.I.Y. Group (M) Berhad generated enough free cash flow to afford its dividend. It paid out more than half (70%) of its free cash flow in the past year, which is within an average 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?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Mr D.I.Y. Group (M) Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 79% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, Mr D.I.Y. Group (M) Berhad has increased its dividend at approximately 6.2% a year on average.

The Bottom Line

Should investors buy Mr D.I.Y. Group (M) Berhad for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, while it has some positive characteristics, we're not inclined to race out and buy Mr D.I.Y. Group (M) Berhad today.

Curious what other investors think of Mr D.I.Y. Group (M) Berhad? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.

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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