Kenanga Investment Bank Berhad's (KLSE:KENANGA) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Kenanga Investment Bank Berhad (KLSE:KENANGA) has announced that it will be paying its dividend of MYR0.08 on the 16th of April, an increased payment from last year's comparable dividend. This will take the annual payment to 7.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Kenanga Investment Bank Berhad

Kenanga Investment Bank Berhad's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Kenanga Investment Bank Berhad's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 28.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kenanga Investment Bank Berhad's Dividend Has Lacked Consistency

Looking back, Kenanga Investment Bank Berhad's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was MYR0.0225 in 2017, and the most recent fiscal year payment was MYR0.08. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. Kenanga Investment Bank Berhad has impressed us by growing EPS at 28% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Kenanga Investment Bank Berhad Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for Kenanga Investment Bank Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.