Kumpulan Perangsang Selangor Berhad's (KLSE:KPS) Shareholders Will Receive A Smaller Dividend Than Last Year

Kumpulan Perangsang Selangor Berhad (KLSE:KPS) is reducing its dividend from last year's comparable payment to MYR0.01 on the 25th of June. The dividend yield of 8.7% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Kumpulan Perangsang Selangor Berhad

Kumpulan Perangsang Selangor Berhad Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Kumpulan Perangsang Selangor Berhad isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 1,254%, which is on the unsustainable side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.0371 in 2014, and the most recent fiscal year payment was MYR0.065. This means that it has been growing its distributions at 5.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Kumpulan Perangsang Selangor Berhad has seen EPS rising for the last five years, at 59% per annum. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Our Thoughts On Kumpulan Perangsang Selangor Berhad's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Kumpulan Perangsang Selangor Berhad that investors should know about before committing capital to this stock. Is Kumpulan Perangsang Selangor 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.