Kawan Food Berhad (KLSE:KAWAN) Is Increasing Its Dividend To MYR0.042

The board of Kawan Food Berhad (KLSE:KAWAN) has announced that it will be increasing its dividend by 17% on the 2nd of April to MYR0.042, up from last year's comparable payment of MYR0.036. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

See our latest analysis for Kawan Food Berhad

Kawan Food Berhad's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Kawan Food Berhad's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 68.8%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Kawan Food Berhad Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from MYR0.012 total annually to MYR0.036. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Kawan Food Berhad Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Kawan Food Berhad has impressed us by growing EPS at 6.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Kawan Food 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Kawan Food Berhad for free with public analyst estimates for the company. Is Kawan Food Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.