Beshom Holdings Berhad (KLSE:BESHOM) Has Announced That Its Dividend Will Be Reduced To MYR0.02

Beshom Holdings Berhad (KLSE:BESHOM) is reducing its dividend from last year's comparable payment to MYR0.02 on the 30th of November. However, the dividend yield of 5.0% is still a decent boost to shareholder returns.

View our latest analysis for Beshom Holdings Berhad

Beshom Holdings Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 70.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 75% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was MYR0.08, compared to the most recent full-year payment of MYR0.05. This works out to be a decline of approximately 4.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 30% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Beshom Holdings Berhad's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Beshom Holdings Berhad you should be aware of, and 1 of them shouldn't be ignored. Is Beshom Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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