AYER Holdings Berhad (KLSE:AYER) Is Paying Out A Dividend Of MYR0.20

AYER Holdings Berhad's (KLSE:AYER) investors are due to receive a payment of MYR0.20 per share on 20th of June. This means the annual payment will be 2.7% of the current stock price, which is lower than the industry average.

See our latest analysis for AYER Holdings Berhad

AYER Holdings Berhad's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, AYER Holdings Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 16.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Dividend Volatility

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. The dividend has gone from an annual total of MYR0.35 in 2014 to the most recent total annual payment of MYR0.20. The dividend has shrunk at around 5.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. AYER Holdings Berhad has impressed us by growing EPS at 17% 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.

We Really Like AYER Holdings Berhad's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

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 1 warning sign for AYER Holdings Berhad that investors need to be conscious of moving forward. Is AYER Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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