Cahya Mata Sarawak Berhad (KLSE:CMSB) Will Pay A Dividend Of RM0.02

Cahya Mata Sarawak Berhad (KLSE:CMSB) will pay a dividend of RM0.02 on the 27th of June. This means the annual payment will be 1.8% of the current stock price, which is lower than the industry average.

See our latest analysis for Cahya Mata Sarawak Berhad

Cahya Mata Sarawak Berhad's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Cahya Mata Sarawak Berhad'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.

Over the next year, EPS is forecast to expand by 3.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.0% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.05 in 2012, and the most recent fiscal year payment was RM0.02. Doing the maths, this is a decline of about 8.8% per year. 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.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Although it's important to note that Cahya Mata Sarawak Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Cahya Mata Sarawak Berhad's Dividend

Overall, a consistent dividend is a good thing, and we think that Cahya Mata Sarawak Berhad has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Cahya Mata Sarawak Berhad that you should be aware of before investing. Is Cahya Mata Sarawak 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.