DXN Holdings Bhd's (KLSE:DXN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of DXN Holdings Bhd. (KLSE:DXN) has announced that it will be increasing its dividend by 11% on the 7th of March to MYR0.01, up from last year's comparable payment of MYR0.009. This will take the dividend yield to an attractive 7.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for DXN Holdings Bhd

DXN Holdings Bhd's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, DXN Holdings Bhd's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 47.9% over the next year. If the dividend continues on this path, the payout ratio could be 7.1% by next year, which we think can be pretty sustainable going forward.

DXN Holdings Bhd Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2023, the dividend has gone from MYR0.016 total annually to MYR0.04. This means that it has been growing its distributions at 58% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

DXN Holdings Bhd Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. DXN Holdings Bhd has impressed us by growing EPS at 5.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On DXN Holdings Bhd's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 DXN Holdings Bhd analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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