Stock Analysis

Ta Ann Holdings Berhad's (KLSE:TAANN) Upcoming Dividend Will Be Larger Than Last Year's

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Ta Ann Holdings Berhad (KLSE:TAANN) will increase its dividend from last year's comparable payment on the 22nd of January to MYR0.15. This takes the dividend yield to 8.5%, which shareholders will be pleased with.

View our latest analysis for Ta Ann Holdings Berhad

Ta Ann Holdings Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Ta Ann Holdings Berhad was paying out 91% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

The next year is set to see EPS grow by 15.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 65% which brings it into quite a comfortable range.

KLSE:TAANN Historic Dividend December 8th 2023

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.0417 in 2013 to the most recent total annual payment of MYR0.30. This means that it has been growing its distributions at 22% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Ta Ann Holdings Berhad Might Find It Hard To Grow Its Dividend

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. Ta Ann Holdings Berhad has impressed us by growing EPS at 20% per year over the past five years. However, Ta Ann Holdings Berhad isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Ta Ann Holdings Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Ta Ann Holdings Berhad has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.

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. For instance, we've picked out 2 warning signs for Ta Ann Holdings Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.