PPB Group Berhad (KLSE:PPB) Has Announced That It Will Be Increasing Its Dividend To MYR0.12

The board of PPB Group Berhad (KLSE:PPB) has announced that it will be paying its dividend of MYR0.12 on the 28th of September, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

See our latest analysis for PPB Group Berhad

PPB Group Berhad's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. PPB Group Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 fall by 4.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 32%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was MYR0.192 in 2012, and the most recent fiscal year payment was MYR0.37. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

PPB Group Berhad Could Grow Its Dividend

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. We are encouraged to see that PPB Group Berhad has grown earnings per share at 7.8% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On PPB Group Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think PPB Group Berhad will make a great income stock. While PPB Group Berhad is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for PPB Group Berhad that investors need to be conscious of moving forward. Is PPB Group 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.