George Kent (Malaysia) Berhad (KLSE:GKENT) Is Reducing Its Dividend To MYR0.01

George Kent (Malaysia) Berhad's (KLSE:GKENT) dividend is being reduced by 33% to MYR0.01 per share on 7th of July, in comparison to last year's comparable payment of MYR0.015. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for George Kent (Malaysia) Berhad

George Kent (Malaysia) Berhad Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, George Kent (Malaysia) Berhad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 63.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 4,001%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was MYR0.02, compared to the most recent full-year payment of MYR0.025. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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 64% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On George Kent (Malaysia) Berhad's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for George Kent (Malaysia) Berhad you should be aware of, and 1 of them can't be ignored. Is George Kent (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.