Kenanga Investment Bank Berhad's (KLSE:KENANGA) dividend will be increasing from last year's payment of the same period to MYR0.07 on 16th of April. This will take the annual payment to 6.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Kenanga Investment Bank Berhad

Kenanga Investment Bank Berhad's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Kenanga Investment Bank Berhad was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 43.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.

Kenanga Investment Bank Berhad's Dividend Has Lacked Consistency

It's comforting to see that Kenanga Investment Bank Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was MYR0.0225 in 2017, and the most recent fiscal year payment was MYR0.07. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Kenanga Investment Bank Berhad has seen EPS rising for the last five years, at 43% per annum. Kenanga Investment Bank Berhad is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Kenanga Investment Bank Berhad's Dividend

Overall, a dividend increase is always good, and we think that Kenanga Investment Bank Berhad is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Kenanga Investment Bank Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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