CEKD Berhad's (KLSE:CEKD) Dividend Will Be Reduced To MYR0.0075

CEKD Berhad's (KLSE:CEKD) dividend is being reduced from last year's payment covering the same period to MYR0.0075 on the 13th of September. The dividend yield will be in the average range for the industry at 3.1%.

Check out our latest analysis for CEKD Berhad

CEKD Berhad's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 106% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Unless the company can turn things around, EPS could fall by 9.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 33%, which is an improvement from where it is currently.

CEKD Berhad Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's not great to see that CEKD Berhad's earnings per share has fallen at approximately 9.7% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

CEKD Berhad's Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

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, CEKD Berhad has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.