N2N Connect Berhad (KLSE:N2N) Has Announced A Dividend Of MYR0.01

N2N Connect Berhad's (KLSE:N2N) investors are due to receive a payment of MYR0.01 per share on 29th of March. The dividend yield will be 4.1% based on this payment which is still above the industry average.

See our latest analysis for N2N Connect Berhad

N2N Connect Berhad's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. N2N Connect Berhad was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

EPS is set to grow by 0.4% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.03 in 2014 to the most recent total annual payment of MYR0.02. The dividend has shrunk at around 4.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, N2N Connect Berhad's EPS was effectively flat over the past five years, which could stop the company from paying more every year. N2N Connect Berhad is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On N2N Connect Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about N2N Connect Berhad's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments N2N Connect Berhad has been making. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for N2N Connect Berhad that you should be aware of before investing. Is N2N Connect Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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