Investors are closely monitoring British American Tobacco (NYSE:BTI) (Malaysia) Berhad due to its upcoming dividend payout, with the ex-dividend date approaching rapidly. To qualify for the dividend, shares must be purchased before November 10th, ensuring a dividend on November 28th. The imminent dividend is set at RM0.19 per share.
In the previous year, the company distributed RM0.88 per share, translating into a trailing return of approximately 9.3% based on the RM9.49 (USD1 = MYR4.6450) share price. Dividends have been a substantial income source for shareholders; however, their continued availability depends on the financial stability of the company.
The company's financial health came under scrutiny last year when it had a high dividend payout ratio of 94% of its income and allocated a significant 82% of its free cash flow to dividends. This high allocation could potentially limit opportunities for business reinvestment.
Given these circumstances and the impending dividend, a comprehensive assessment of the sustainability of these dividends becomes essential. This review becomes all the more critical considering the significant trailing yield.
InvestingPro Insights
In the context of British American Tobacco (Malaysia) Berhad's financial health and dividend sustainability, real-time data and InvestingPro tips can provide valuable insights.
InvestingPro data reveals that BTI has an impressive market cap of $69.74 billion and a low P/E ratio of 6.48 as of Q2 2023, indicating a potentially undervalued stock. The PEG ratio is 0.1, suggesting a strong growth outlook relative to the company's earnings multiple. Additionally, the company has maintained a robust gross profit margin of 82.66% in the last twelve months as of Q2 2023.
InvestingPro tips highlight that BTI has a perfect Piotroski Score of 9, indicative of a strong financial position. The company also boasts high earnings quality, with free cash flow exceeding net income. This could potentially offset concerns about the high allocation of free cash flow to dividends. Furthermore, BTI has a history of increasing dividends, having raised them for four consecutive years, which could be reassuring for dividend investors.
For more detailed insights and additional tips, consider exploring the InvestingPro platform, which currently offers 12 more tips for BTI.
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