Poh Huat Resources Holdings Berhad (KLSE:POHUAT) Has Announced A Dividend Of MYR0.02

The board of Poh Huat Resources Holdings Berhad (KLSE:POHUAT) has announced that it will pay a dividend of MYR0.02 per share on the 23rd of July. This means the dividend yield will be fairly typical at 4.8%.

View our latest analysis for Poh Huat Resources Holdings Berhad

Poh Huat Resources Holdings Berhad's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Poh Huat Resources Holdings Berhad's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 32.2% over the next year. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was MYR0.015, compared to the most recent full-year payment of MYR0.07. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Poh Huat Resources Holdings Berhad's EPS has declined at around 13% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Poh Huat Resources Holdings Berhad's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Poh Huat Resources Holdings Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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