Westports Holdings Berhad (KLSE:WPRTS) Has Announced That Its Dividend Will Be Reduced To MYR0.0746

Westports Holdings Berhad (KLSE:WPRTS) is reducing its dividend from last year's comparable payment to MYR0.0746 on the 20th of February. However, the dividend yield of 3.8% still remains in a typical range for the industry.

View our latest analysis for Westports Holdings Berhad

Westports Holdings Berhad's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Westports Holdings Berhad was paying out 70% of earnings, but a comparatively small 73% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 17.3% over the next year. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.

Westports Holdings Berhad's Dividend Has Lacked Consistency

It's comforting to see that Westports Holdings Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the annual payment back then was MYR0.104, compared to the most recent full-year payment of MYR0.144. This means that it has been growing its distributions at 3.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Westports Holdings Berhad May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Westports Holdings Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Westports Holdings Berhad's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Westports Holdings Berhad's Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. For example, we've picked out 1 warning sign for Westports 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.

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