Rhone Ma Holdings Berhad (KLSE:RHONEMA) Has Affirmed Its Dividend Of MYR0.01

Rhone Ma Holdings Berhad (KLSE:RHONEMA) has announced that it will pay a dividend of MYR0.01 per share on the 15th of July. Based on this payment, the dividend yield will be 3.0%, which is fairly typical for the industry.

View our latest analysis for Rhone Ma Holdings Berhad

Rhone Ma Holdings Berhad's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Rhone Ma Holdings Berhad was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 3.7%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Rhone Ma Holdings Berhad's Dividend Has Lacked Consistency

Rhone Ma Holdings Berhad has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was MYR0.0364, compared to the most recent full-year payment of MYR0.02. Doing the maths, this is a decline of about 8.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

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. Unfortunately, Rhone Ma Holdings Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Rhone Ma Holdings Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Rhone Ma Holdings Berhad has been making. 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. 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 Rhone Ma Holdings Berhad that investors need to be conscious of moving forward. Is Rhone Ma Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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