Apex Healthcare Berhad (KLSE:AHEALTH) will increase its dividend on the 16th of June to RM0.09. This will take the dividend yield from 1.9% to 3.9%, providing a nice boost to shareholder returns.
Apex Healthcare Berhad Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Apex Healthcare Berhad's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 6.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 96%, which probably can't continue putting some pressure on the balance sheet.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the first annual payment was RM0.031, compared to the most recent full-year payment of RM0.055. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Apex Healthcare Berhad might have put its house in order since then, but we remain cautious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Apex Healthcare Berhad has been growing its earnings per share at 11% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
We Really Like Apex Healthcare Berhad's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Apex Healthcare 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.
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.