Gopeng Berhad's (KLSE:GOPENG) dividend is being reduced by 33% to MYR0.01 per share on 17th of August, in comparison to last year's comparable payment of MYR0.015. This means that the annual payment will be 4.2% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Gopeng Berhad
Gopeng Berhad Might Find It Hard To Continue The Dividend
We aren't too impressed by dividend yields unless they can be sustained over time. Even though Gopeng Berhad is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Looking forward, earnings per share could 57.1% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was MYR0.0436 in 2013, and the most recent fiscal year payment was MYR0.015. Dividend payments have fallen sharply, down 66% 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.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Gopeng Berhad's EPS has declined at around 57% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Gopeng Berhad's Dividend Doesn't Look Great
To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
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. Case in point: We've spotted 4 warning signs for Gopeng Berhad (of which 2 are a bit concerning!) you should know about. Is Gopeng Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.