DynaFront Holdings Berhad's (KLSE:DYNAFNT) periodic dividend will be increasing on the 9th of September to MYR0.007, with investors receiving 17% more than last year's MYR0.006. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for DynaFront Holdings Berhad
DynaFront Holdings Berhad's Earnings Easily Cover The Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, DynaFront Holdings Berhad's dividend was only 48% of earnings, however it was paying out 153% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS could expand by 10.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.
DynaFront Holdings Berhad Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The most recent annual payment of MYR0.012 is about the same as the annual payment 2 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that DynaFront Holdings Berhad has grown earnings per share at 11% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
Our Thoughts On DynaFront Holdings Berhad's Dividend
In summary, while it's always good to see the dividend being raised, we don't think DynaFront Holdings Berhad's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for DynaFront Holdings Berhad you should be aware of, and 2 of them are concerning. 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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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.