Stock Analysis

Kerjaya Prospek Group Berhad (KLSE:KERJAYA) Has Announced A Dividend Of MYR0.02

KLSE:KERJAYA
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Kerjaya Prospek Group Berhad (KLSE:KERJAYA) has announced that it will pay a dividend of MYR0.02 per share on the 6th of July. Based on this payment, the dividend yield on the company's stock will be 5.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Kerjaya Prospek Group Berhad

Kerjaya Prospek Group Berhad's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Kerjaya Prospek Group Berhad was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 80% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 51.5%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

historic-dividend
KLSE:KERJAYA Historic Dividend May 25th 2023

Kerjaya Prospek Group Berhad's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of MYR0.0364 in 2014 to the most recent total annual payment of MYR0.06. This means that it has been growing its distributions at 5.7% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Kerjaya Prospek Group Berhad's earnings per share has fallen at approximately 2.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Kerjaya Prospek Group Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kerjaya Prospek Group Berhad's payments, as there could be some issues with sustaining them into the future. While Kerjaya Prospek Group Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Kerjaya Prospek Group Berhad that investors should take into consideration. Is Kerjaya Prospek Group 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.