Should Country View Berhad (KLSE:CVIEW) Be Part Of Your Dividend Portfolio?

Today we'll take a closer look at Country View Berhad (KLSE:CVIEW) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

In this case, Country View Berhad likely looks attractive to dividend investors, given its 7.1% dividend yield and eight-year payment history. It sure looks interesting on these metrics - but there's always more to the story. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

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Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. In the last year, Country View Berhad paid out 46% of its profit as dividends. This is a medium payout level that leaves enough capital in the business to fund opportunities that might arise, while also rewarding shareholders. One of the risks is that management reinvests the retained capital poorly instead of paying a higher dividend.

Another important check we do is to see if the free cash flow generated is sufficient to pay the dividend. Country View Berhad paid out a conservative 25% of its free cash flow as dividends last year. It's positive to see that Country View Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Remember, you can always get a snapshot of Country View Berhad's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. The first recorded dividend for Country View Berhad, in the last decade, was eight years ago. It's good to see that Country View Berhad has been paying a dividend for a number of years. However, the dividend has been cut at least once in the past, and we're concerned that what has been cut once, could be cut again. During the past eight-year period, the first annual payment was RM0.2 in 2012, compared to RM0.08 last year. The dividend has fallen 67% over that period.

We struggle to make a case for buying Country View Berhad for its dividend, given that payments have shrunk over the past eight years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. It's not great to see that Country View Berhad's have fallen at approximately 6.8% over the past five years. A modest decline in earnings per share is not great to see, but it doesn't automatically make a dividend unsustainable. Still, we'd vastly prefer to see EPS growth when researching dividend stocks.

Conclusion

To summarise, shareholders should always check that Country View Berhad's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. It's great to see that Country View Berhad is paying out a low percentage of its earnings and cash flow. Earnings per share are down, and Country View Berhad's dividend has been cut at least once in the past, which is disappointing. In sum, we find it hard to get excited about Country View Berhad from a dividend perspective. It's not that we think it's a bad business; just that there are other companies that perform better on these criteria.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Country View Berhad has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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This article by Simply Wall St is general in nature. 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.
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