Kumpulan Kitacon Berhad (KLSE:KITACON) Has Affirmed Its Dividend Of MYR0.01

The board of Kumpulan Kitacon Berhad (KLSE:KITACON) has announced that it will pay a dividend on the 27th of March, with investors receiving MYR0.01 per share. This payment means that the dividend yield will be 2.7%, which is around the industry average.

Check out our latest analysis for Kumpulan Kitacon Berhad

Kumpulan Kitacon Berhad's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Kumpulan Kitacon Berhad's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 39.7%. If the dividend continues along recent trends, we estimate the payout ratio will be , which is in the range that makes us comfortable with the sustainability of the dividend.

Kumpulan Kitacon Berhad's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of MYR0.04 in 2023 to the most recent total annual payment of MYR0.02. Dividend payments have fallen sharply, down 50% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Kumpulan Kitacon Berhad's EPS has fallen by approximately 48% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Kumpulan Kitacon Berhad is a great stock to add to your portfolio if income is your focus.

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 2 warning signs for Kumpulan Kitacon Berhad that investors should take into consideration. Is Kumpulan Kitacon Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.