DKSH Holdings (Malaysia) Berhad's (KLSE:DKSH) Dividend Will Be Increased To MYR0.17

DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) has announced that it will be increasing its periodic dividend on the 18th of July to MYR0.17, which will be 6.3% higher than last year's comparable payment amount of MYR0.16. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

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

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. DKSH Holdings (Malaysia) Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 16.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of 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 dividend has gone from MYR0.09 total annually to MYR0.16. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. DKSH Holdings (Malaysia) Berhad might have put its house in order since then, but we remain cautious.

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 seen EPS rising for the last five years, at 20% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On DKSH Holdings (Malaysia) Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While DKSH Holdings (Malaysia) Berhad is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good 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. Case in point: We've spotted 2 warning signs for DKSH Holdings (Malaysia) Berhad (of which 1 is potentially serious!) 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.