Poh Huat Resources Holdings Berhad's (KLSE:POHUAT) Dividend Will Be 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 3rd of May. This means that the annual payment will be 4.9% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Poh Huat Resources Holdings Berhad

Poh Huat Resources Holdings Berhad's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Poh Huat Resources Holdings Berhad was quite comfortably earning enough to cover the dividend. 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 67.6% over the next year. If the dividend continues on this path, the payout ratio could be 58% 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. The annual payment during the last 10 years was MYR0.015 in 2014, and the most recent fiscal year payment was MYR0.07. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Poh Huat Resources Holdings Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Poh Huat Resources Holdings Berhad's EPS has declined at around 14% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Poh Huat Resources Holdings Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Poh Huat Resources Holdings Berhad that investors should take into consideration. 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.