[ad_1]
DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) will increase its dividend from last year’s comparable payment on the 20th of July to MYR0.16. This makes the dividend yield 2.2%, which is above the industry average.
See our latest analysis for DKSH Holdings (Malaysia) Berhad
DKSH Holdings (Malaysia) Berhad’s Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, DKSH Holdings (Malaysia) Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 2.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 50%, which is comfortable for the company to continue in the future.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.07, compared to the most recent full-year payment of MYR0.11. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. It’s encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. DKSH Holdings (Malaysia) Berhad has seen EPS rising for the last five years, at 15% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like DKSH Holdings (Malaysia) Berhad’s Dividend
Overall, a dividend increase is always good, and we think that DKSH Holdings (Malaysia) Berhad is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company’s distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won’t be a problem if this doesn’t become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, DKSH Holdings (Malaysia) Berhad has 3 warning signs (and 1 which doesn’t sit too well with us) we think you should know about. Is DKSH Holdings (Malaysia) Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
[ad_2]
Source link