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FGV Holdings Berhad (KLSE:FGV) has announced that on 12th of April, it will be paying a dividend ofMYR0.03, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 2.1%, which is lower than the average for the industry.
See our latest analysis for FGV Holdings Berhad
FGV Holdings Berhad's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, FGV Holdings Berhad's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Over the next year, EPS is forecast to expand by 188.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.17 in 2014, and the most recent fiscal year payment was MYR0.03. Dividend payments have fallen sharply, down 82% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
FGV Holdings Berhad's Dividend Might Lack Growth
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. FGV Holdings Berhad has impressed us by growing EPS at 57% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.
Our Thoughts On FGV Holdings Berhad's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for FGV Holdings Berhad that investors should know about before committing capital to this stock. Is FGV Holdings Berhad 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.