DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) Is Increasing Its Dividend To RM0.11

DKSH Holdings (Malaysia) Berhad's (KLSE:DKSH) dividend will be increasing to RM0.11 on 28th of July. This makes the dividend yield about the same as the industry average at 2.3%.

See our latest analysis for DKSH Holdings (Malaysia) Berhad

DKSH Holdings (Malaysia) Berhad's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, DKSH Holdings (Malaysia) Berhad's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 20%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was RM0.07, compared to the most recent full-year payment of RM0.11. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. We are encouraged to see that DKSH Holdings (Malaysia) Berhad has grown earnings per share at 13% per year over the past five years. DKSH Holdings (Malaysia) Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for DKSH Holdings (Malaysia) Berhad that you should be aware of before investing. 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.