Suria Capital Holdings Berhad (KLSE:SURIA) has announced that on 26th of July, it will be paying a dividend ofMYR0.015, which a reduction from last year's comparable dividend. This means that the dividend yield is 1.8%, which is a bit low when comparing to other companies in the industry.
Check out our latest analysis for Suria Capital Holdings Berhad
Suria Capital Holdings Berhad's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Suria Capital Holdings Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 87.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.
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 MYR0.0525 in 2014, and the most recent fiscal year payment was MYR0.035. This works out to be a decline of approximately 4.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Suria Capital Holdings Berhad's EPS has declined at around 8.3% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
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. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Suria Capital Holdings Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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