Kumpulan Perangsang Selangor Berhad (KLSE:KPS) Is Increasing Its Dividend To MYR0.02

Kumpulan Perangsang Selangor Berhad (KLSE:KPS) will increase its dividend from last year's comparable payment on the 18th of June to MYR0.02. This makes the dividend yield 6.1%, which is above the industry average.

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Kumpulan Perangsang Selangor Berhad's Payment Could Potentially Have 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, Kumpulan Perangsang Selangor 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 11.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 56%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Kumpulan Perangsang Selangor Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was MYR0.0371, compared to the most recent full-year payment of MYR0.04. Its dividends have grown at less than 1% per annum over this time frame. 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.

Kumpulan Perangsang Selangor Berhad May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. Kumpulan Perangsang Selangor Berhad is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Kumpulan Perangsang Selangor Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kumpulan Perangsang Selangor Berhad's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've picked out 3 warning signs for Kumpulan Perangsang Selangor Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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