The board of Can-One Berhad (KLSE:CANONE) has announced that it will pay a dividend on the 29th of July, with investors receiving RM0.04 per share. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
Can-One Berhad's Distributions May Be Difficult To Sustain
Even a low dividend yield can be attractive if it is sustained for years on end. Even in the absence of profits, Can-One Berhad is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Looking forward, earnings per share could 24.8% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.03 in 2012, and the most recent fiscal year payment was RM0.04. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
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. Can-One Berhad's EPS has fallen by approximately 25% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
We're Not Big Fans Of Can-One Berhad's Dividend
In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Can-One Berhad that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.