Muda Holdings Berhad (KLSE:MUDA) Is Due To Pay A Dividend Of RM0.05

Muda Holdings Berhad's (KLSE:MUDA) investors are due to receive a payment of RM0.05 per share on 15th of July. This payment means that the dividend yield will be 2.3%, which is around the industry average.

See our latest analysis for Muda Holdings Berhad

Muda Holdings Berhad's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Muda Holdings Berhad was paying only paying out a fraction of earnings, but the payment was a massive 148% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 16.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Muda Holdings Berhad Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from RM0.025 in 2012 to the most recent annual payment of RM0.05. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Muda Holdings Berhad has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Muda Holdings Berhad's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Muda Holdings Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.