APM Automotive Holdings Berhad (KLSE:APM) Will Pay A Smaller Dividend Than Last Year

APM Automotive Holdings Berhad (KLSE:APM) has announced it will be reducing its dividend payable on the 2nd of October to MYR0.07, which is 30% lower than what investors received last year for the same period. However, the dividend yield of 8.8% is still a decent boost to shareholder returns.

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APM Automotive Holdings Berhad's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by APM Automotive Holdings Berhad's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS could expand by 59.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for APM Automotive Holdings Berhad

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from MYR0.195 total annually to MYR0.28. This means that it has been growing its distributions at 3.7% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. APM Automotive Holdings Berhad has seen EPS rising for the last five years, at 59% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that APM Automotive Holdings Berhad could prove to be a strong dividend payer.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While APM Automotive Holdings Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think APM Automotive Holdings Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for APM Automotive Holdings Berhad that investors should take into consideration. Is APM Automotive Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.