Kerjaya Prospek Property Berhad (KLSE:KPPROP) Will Pay A Dividend Of MYR0.01

The board of Kerjaya Prospek Property Berhad (KLSE:KPPROP) has announced that it will pay a dividend on the 2nd of October, with investors receiving MYR0.01 per share. This payment means that the dividend yield will be 3.9%, which is around the industry average.

Check out our latest analysis for Kerjaya Prospek Property Berhad

Kerjaya Prospek Property Berhad's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Kerjaya Prospek Property Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Unless the company can turn things around, EPS could fall by 11.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 24%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Kerjaya Prospek Property Berhad Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was MYR0.02 in 2022, and the most recent fiscal year payment was MYR0.03. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Kerjaya Prospek Property Berhad's EPS has declined at around 11% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We should note that Kerjaya Prospek Property Berhad has issued stock equal to 49% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kerjaya Prospek Property 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 probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Kerjaya Prospek Property Berhad that investors should take into consideration. Is Kerjaya Prospek Property Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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