Beshom Holdings Berhad's (KLSE:BESHOM) Dividend Will Be Reduced To MYR0.02

Beshom Holdings Berhad (KLSE:BESHOM) has announced that on 30th of November, it will be paying a dividend ofMYR0.02, which a reduction from last year's comparable dividend. The yield is still above the industry average at 4.9%.

View our latest analysis for Beshom Holdings Berhad

Beshom Holdings Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, Beshom Holdings Berhad was paying out a very large proportion of what it was earning and 195% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next year is set to see EPS grow by 32.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 70% which brings it into quite a comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.08 total annually to MYR0.05. This works out to be a decline of approximately 4.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Beshom Holdings Berhad's earnings per share has shrunk at 26% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

Beshom 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 payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Beshom Holdings Berhad (1 is potentially serious!) that you should be aware of before investing. 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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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.