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

The board of Rhone Ma Holdings Berhad (KLSE:RHONEMA) has announced that it will pay a dividend of MYR0.01 per share on the 14th of July. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

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Rhone Ma Holdings Berhad's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Rhone Ma Holdings Berhad's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 3.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Rhone Ma Holdings Berhad

Rhone Ma Holdings Berhad's Dividend Has Lacked Consistency

Looking back, Rhone Ma Holdings Berhad's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from MYR0.0364 total annually to MYR0.025. The dividend has shrunk at around 4.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Rhone Ma Holdings Berhad May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. Growth of 3.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, a consistent dividend is a good thing, and we think that Rhone Ma Holdings Berhad has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 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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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.