Freight Management Holdings Bhd's (KLSE:FREIGHT) Dividend Will Be RM0.01

By
Simply Wall St
Published
August 24, 2021
KLSE:FM
Source: Shutterstock

The board of Freight Management Holdings Bhd (KLSE:FREIGHT) has announced that it will pay a dividend on the 18th of October, with investors receiving RM0.01 per share. Based on this payment, the dividend yield on the company's stock will be 5.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Freight Management Holdings Bhd

Freight Management Holdings Bhd's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Freight Management Holdings Bhd was paying a whopping 163% as a dividend, but this only made up 26% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 22.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

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KLSE:FREIGHT Historic Dividend August 24th 2021

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 RM0.013 in 2011 to the most recent annual payment of RM0.025. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 4.9% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Freight Management Holdings Bhd could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Freight Management Holdings Bhd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Freight Management Holdings Bhd is earning enough to cover the payments, the cash flows are lacking. 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 1 warning sign for Freight Management Holdings Bhd that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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