Tan Chong Motor Holdings Berhad's (KLSE:TCHONG) Dividend Will Be RM0.015

The board of Tan Chong Motor Holdings Berhad (KLSE:TCHONG) has announced that it will pay a dividend of RM0.015 per share on the 30th of June. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

See our latest analysis for Tan Chong Motor Holdings Berhad

Tan Chong Motor Holdings Berhad Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Tan Chong Motor Holdings Berhad isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share could 17.3% over the next year if the trend of the last few years can't be broken. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

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 2012, the dividend has gone from RM0.12 to RM0.03. The dividend has fallen 75% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 17% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Tan Chong Motor Holdings Berhad is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Tan Chong Motor Holdings Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.