The board of Yenher Holdings Berhad (KLSE:YENHER) has announced that it will pay a dividend of MYR0.015 per share on the 11th of October. Based on this payment, the dividend yield on the company's stock will be 3.5%, which is an attractive boost to shareholder returns.
View our latest analysis for Yenher Holdings Berhad
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Yenher Holdings Berhad's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% indicates it is more focused on returning cash to shareholders than growing the business.
EPS is set to fall by 4.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 46%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
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 last annual payment of MYR0.03 was flat on the annual payment from3 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Yenher Holdings Berhad has seen earnings per share falling at 4.1% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yenher Holdings Berhad's payments, as there could be some issues with sustaining them into the future. While Yenher Holdings Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Yenher Holdings Berhad has 3 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.