Gopeng Berhad (KLSE:GOPENG) Is Reducing Its Dividend To MYR0.01

The board of Gopeng Berhad (KLSE:GOPENG) has announced it will be reducing its dividend by 33% from last year's payment of MYR0.015 on the 17th of August, with shareholders receiving MYR0.01. However, the dividend yield of 4.2% still remains in a typical range for the industry.

See our latest analysis for Gopeng Berhad

Gopeng Berhad's Distributions May Be Difficult To Sustain

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Despite not generating a profit, Gopeng Berhad is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Recent, EPS has fallen by 57.1%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MYR0.0436 in 2013, and the most recent fiscal year payment was MYR0.015. Dividend payments have fallen sharply, down 66% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Gopeng Berhad's earnings per share has shrunk at 57% 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.

Gopeng Berhad's Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Gopeng Berhad has 4 warning signs (and 2 which are a bit concerning) we think you should know about. 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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