Poh Kong Holdings Berhad (KLSE:POHKONG) Is Paying Out A Larger Dividend Than Last Year

Poh Kong Holdings Berhad's (KLSE:POHKONG) dividend will be increasing from last year's payment of the same period to MYR0.013 on 10th of March. Even though the dividend went up, the yield is still quite low at only 3.3%.

Our analysis indicates that POHKONG is potentially undervalued!

Poh Kong Holdings Berhad's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Poh Kong Holdings Berhad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 25.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 9.1% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was MYR0.015, compared to the most recent full-year payment of MYR0.026. This means that it has been growing its distributions at 5.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Poh Kong Holdings Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Poh Kong Holdings Berhad has grown earnings per share at 26% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Poh Kong Holdings Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Poh Kong Holdings Berhad is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Poh Kong Holdings Berhad that investors should take into consideration. Is Poh Kong Holdings 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.