Stock Analysis

Able Global Berhad's (KLSE:ABLEGLOB) Dividend Will Be Reduced To MYR0.01

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Able Global Berhad's (KLSE:ABLEGLOB) dividend is being reduced from last year's payment covering the same period to MYR0.01 on the 10th of April. The dividend yield will be in the average range for the industry at 3.1%.

Check out our latest analysis for Able Global Berhad

Able Global Berhad's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Able Global Berhad's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 55.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

KLSE:ABLEGLOB Historic Dividend March 17th 2023

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 MYR0.0143 in 2013, and the most recent fiscal year payment was MYR0.04. This works out to be a compound annual growth rate (CAGR) of approximately 11% 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.

Able Global Berhad Could Grow Its Dividend

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. Able Global Berhad has seen EPS rising for the last five years, at 5.5% per annum. Able Global Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. To that end, Able Global Berhad has 4 warning signs (and 2 which don't sit too well with us) we think you should know about. Is Able Global Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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