OSK Holdings Berhad (KLSE:OSK) Will Pay A Larger Dividend Than Last Year At MYR0.02

OSK Holdings Berhad (KLSE:OSK) will increase its dividend from last year's comparable payment on the 6th of October to MYR0.02. This will take the annual payment to 6.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for OSK Holdings Berhad

OSK Holdings Berhad's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, OSK Holdings Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 39.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was MYR0.03, compared to the most recent full-year payment of MYR0.06. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that OSK Holdings Berhad has been growing its earnings per share at 8.7% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

OSK Holdings Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that OSK Holdings Berhad is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for OSK Holdings Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.