DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) Has Announced That It Will Be Increasing Its Dividend To MYR0.16

DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of July to MYR0.16. This makes the dividend yield 3.0%, which is above the industry average.

Check out our latest analysis for DKSH Holdings (Malaysia) Berhad

DKSH Holdings (Malaysia) Berhad's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, DKSH Holdings (Malaysia) Berhad's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 5.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.09, compared to the most recent full-year payment of MYR0.16. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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 impressed us by growing EPS at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like DKSH Holdings (Malaysia) Berhad's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, DKSH Holdings (Malaysia) Berhad has 3 warning signs (and 2 which don'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.

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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.