Dayang Enterprise Holdings Bhd's (KLSE:DAYANG) Dividend Will Be Increased To MYR0.07

The board of Dayang Enterprise Holdings Bhd (KLSE:DAYANG) has announced that it will be paying its dividend of MYR0.07 on the 17th of March, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 7.7%, providing a nice boost to shareholder returns.

See our latest analysis for Dayang Enterprise Holdings Bhd

Dayang Enterprise Holdings Bhd's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Dayang Enterprise Holdings Bhd's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 13.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.07 in 2015 to the most recent total annual payment of MYR0.14. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Dayang Enterprise Holdings Bhd might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. Earnings have grown at around 2.4% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Dayang Enterprise Holdings Bhd has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Dayang Enterprise Holdings Bhd's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Case in point: We've spotted 2 warning signs for Dayang Enterprise Holdings Bhd (of which 1 is potentially serious!) you should know about. Is Dayang Enterprise Holdings Bhd 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.