Fascinating technology

Globetronics Technology Bhd (KLSE:GTRONIC) has passed our checks and is set to pay a dividend of RM0.03

Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Globetronics Technology Bhd (KLSE: GTRONIC) is set to trade ex-dividend in the next 3 days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement that does not appear on the record date. As a result, Globetronics Technology Bhd investors who buy the stock on or after March 11 will not receive the dividend, which will be paid on March 24.

The company’s next dividend payment will be RM0.03 per share, following last year when the company paid a total of RM0.075 to shareholders. Based on the value of last year’s payouts, Globetronics Technology Bhd stock has a yield of around 5.5% on the current share price of MYR 1.36. Dividends are a major contributor to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.

Check out our latest review for Globetronics Technology Bhd

Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Globetronics Technology Bhd shed a comfortable 38% of its profit last year. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. It distributed 27% of its free cash flow as dividends, a comfortable level of distribution for most companies.

It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

KLSE: GTRONIC Historic Dividend March 7, 2022

Have earnings and dividends increased?

Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. For this reason, we are pleased to see that Globetronics Technology Bhd’s earnings per share have increased by 15% annually over the past five years. The company managed to grow its profits at a rapid pace, while reinvesting most of the profits back into the business. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Globetronics Technology Bhd has achieved an average annual increase of 7.5% per year in its dividend, based on dividend payouts over the past 10 years. It’s encouraging to see the company increasing its dividends as earnings rise, suggesting at least some corporate interest in rewarding shareholders.

Last takeaway

Has Globetronics Technology Bhd got what it takes to maintain its dividend payments? Globetronics Technology Bhd increased its earnings per share while simultaneously reinvesting in the business. Unfortunately, it has cut the dividend at least once in the last 10 years, but the conservative payout ratio makes the current dividend look sustainable. Globetronics Technology Bhd looks solid on this overall analysis, and we would definitely consider investigating it further.

In light of this, although Globetronics Technology Bhd has an attractive dividend, it is worth knowing the risks associated with this stock. To help you, we found 2 warning signs for Globetronics Technology Bhd which you should be aware of before investing in their stocks.

As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. here is a curated list of attractive stocks that are strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and 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 financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.