OSK Holdings Berhad (KLSE:OSK) Has Affirmed Its Dividend Of MYR0.03

The board of OSK Holdings Berhad (KLSE:OSK) has announced that it will pay a dividend of MYR0.03 per share on the 4th of October. This makes the dividend yield 4.6%, which will augment investor returns quite nicely.

View our latest analysis for OSK Holdings Berhad

OSK Holdings Berhad's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. OSK Holdings Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 18.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from MYR0.05 total annually to MYR0.07. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, OSK Holdings Berhad has only grown its earnings per share at 4.1% per annum over the past five years. While growth may be thin on the ground, OSK Holdings Berhad could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On OSK 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. While OSK Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for OSK Holdings Berhad (of which 1 shouldn't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.