PBA Holdings Bhd's (KLSE:PBA) investors are due to receive a payment of RM0.01 per share on 29th of July. Based on this payment, the dividend yield will be 2.7%, which is fairly typical for the industry.
See our latest analysis for PBA Holdings Bhd
PBA Holdings Bhd's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, PBA Holdings Bhd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Unless the company can turn things around, EPS could fall by 9.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 21%, which is definitely feasible to continue.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from RM0.035 to RM0.022. This works out to be a decline of approximately 4.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. PBA Holdings Bhd has seen earnings per share falling at 9.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think PBA Holdings Bhd is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for PBA Holdings Bhd you should be aware of, and 1 of them is significant. Is PBA Holdings Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About KLSE:PBA
PBA Holdings Bhd
An investment holding company, operates as a water supplier in the state of Penang, Malaysia.
Solid track record with excellent balance sheet.
