Dominant Enterprise Berhad (KLSE:DOMINAN) Has Affirmed Its Dividend Of MYR0.01

The board of Dominant Enterprise Berhad (KLSE:DOMINAN) has announced that it will pay a dividend on the 24th of October, with investors receiving MYR0.01 per share. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.

Check out our latest analysis for Dominant Enterprise Berhad

Dominant Enterprise Berhad's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Dominant Enterprise Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 5.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is definitely feasible to continue.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was MYR0.0332, compared to the most recent full-year payment of MYR0.04. This works out to be a compound annual growth rate (CAGR) of approximately 1.9% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

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. It's not great to see that Dominant Enterprise Berhad's earnings per share has fallen at approximately 5.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Dominant Enterprise Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Dominant Enterprise Berhad's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Dominant Enterprise Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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