Westports Holdings Berhad (KLSE:WPRTS) Is Increasing Its Dividend To MYR0.0819

Westports Holdings Berhad (KLSE:WPRTS) has announced that it will be increasing its periodic dividend on the 22nd of August to MYR0.0819, which will be 19% higher than last year's comparable payment amount of MYR0.0691. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

See our latest analysis for Westports Holdings Berhad

Westports Holdings Berhad's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Westports Holdings Berhad is earning enough to cover the payment, but then it makes up 98% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 0.2% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 74%, which is comfortable for the company to continue in the future.

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. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the dividend has gone from MYR0.104 total annually to MYR0.144. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Westports Holdings Berhad has only grown its earnings per share at 4.7% per annum over the past five years. Westports Holdings Berhad is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Westports Holdings Berhad will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Westports Holdings Berhad that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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