Padini Holdings Berhad (KLSE:PADINI) Has Affirmed Its Dividend Of MYR0.025

Padini Holdings Berhad (KLSE:PADINI) has announced that it will pay a dividend of MYR0.025 per share on the 27th of December. This payment means that the dividend yield will be 3.5%, which is around the industry average.

See our latest analysis for Padini Holdings Berhad

Padini Holdings Berhad's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Padini Holdings Berhad was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 39.8%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was MYR0.10 in 2014, and the most recent fiscal year payment was MYR0.115. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Padini Holdings Berhad's earnings per share has shrunk at approximately 4.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Padini Holdings Berhad's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Padini Holdings Berhad that investors should take into consideration. Is Padini Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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