Tien Wah Press Holdings Berhad (KLSE:TIENWAH) Will Pay A Smaller Dividend Than Last Year

Tien Wah Press Holdings Berhad's (KLSE:TIENWAH) dividend is being reduced to RM0.028 on the 29th of July. The dividend yield of 5.3% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Tien Wah Press Holdings Berhad

Tien Wah Press Holdings Berhad Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 184% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 24%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 40.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 262%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.17 in 2012, and the most recent fiscal year payment was RM0.056. This works out to a decline of approximately 67% 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

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 40% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Tien Wah Press Holdings Berhad's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Tien Wah Press Holdings Berhad (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.