Chin Well Holdings Berhad's (KLSE:CHINWEL) Dividend Will Be Increased To MYR0.0176

Chin Well Holdings Berhad's (KLSE:CHINWEL) dividend will be increasing from last year's payment of the same period to MYR0.0176 on 25th of November. This makes the dividend yield 5.3%, which is above the industry average.

View our latest analysis for Chin Well Holdings Berhad

Chin Well Holdings Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Chin Well Holdings Berhad was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, so there isn't too much pressure on the dividend.

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 2014, the annual payment back then was MYR0.0566, compared to the most recent full-year payment of MYR0.0551. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

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. Chin Well Holdings Berhad's earnings per share has shrunk at 31% a year over the past 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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 3 warning signs for Chin Well Holdings Berhad that investors should take into consideration. 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.