NTPM Holdings Berhad (KLSE:NTPM) Has Announced A Dividend Of MYR0.008

NTPM Holdings Berhad (KLSE:NTPM) has announced that it will pay a dividend of MYR0.008 per share on the 28th of October. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.

Check out our latest analysis for NTPM Holdings Berhad

NTPM Holdings Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the dividend made up 130% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, earnings per share is forecast to rise by 120.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.029 in 2012, and the most recent fiscal year payment was MYR0.016. The dividend has shrunk at around 5.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. NTPM Holdings Berhad's EPS has fallen by approximately 23% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of NTPM Holdings Berhad's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for NTPM Holdings Berhad (2 are significant!) that you should be aware of before investing. Is NTPM Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.