PPB Group Berhad's (KLSE:PPB) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of PPB Group Berhad (KLSE:PPB) has announced that it will be increasing its dividend on the 28th of September to RM0.10. The announced payment will take the dividend yield to 2.6%, which is in line with the average for the industry.

View our latest analysis for PPB Group Berhad

PPB Group Berhad's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, PPB Group 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 5.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 dividend has gone from RM0.73 in 2011 to the most recent annual payment of RM0.30. This works out to be a decline of approximately 8.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. PPB Group Berhad has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for PPB Group Berhad's prospects of growing its dividend payments in the future.

Our Thoughts On PPB Group Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think PPB Group Berhad's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think PPB Group Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for PPB Group Berhad that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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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.
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