A-Rank Berhad's (KLSE:ARANK) Dividend Is Being Reduced To MYR0.0225

A-Rank Berhad (KLSE:ARANK) is reducing its dividend from last year's comparable payment to MYR0.0225 on the 23rd of December. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.

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A-Rank Berhad's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, A-Rank Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 8.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for A-Rank Berhad

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 MYR0.0161 in 2015, and the most recent fiscal year payment was MYR0.0225. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Growth Potential

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. A-Rank Berhad has impressed us by growing EPS at 8.1% per year over the past five years. A-Rank Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like A-Rank Berhad's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like A-Rank Berhad does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for A-Rank Berhad that investors should take into consideration. Is A-Rank 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.