George Kent (Malaysia) Berhad (KLSE:GKENT) Has Affirmed Its Dividend Of MYR0.01

The board of George Kent (Malaysia) Berhad (KLSE:GKENT) has announced that it will pay a dividend of MYR0.01 per share on the 29th of December. This means the dividend yield will be fairly typical at 3.8%.

Check out the opportunities and risks within the MY Construction industry.

George Kent (Malaysia) Berhad's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, George Kent (Malaysia) Berhad's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 20.0% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The last annual payment of MYR0.02 was flat on the annual payment from10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. George Kent (Malaysia) Berhad's EPS has fallen by approximately 20% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about George Kent (Malaysia) Berhad's payments, as there could be some issues with sustaining them into the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, George Kent (Malaysia) 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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