Dominant Enterprise Berhad (KLSE:DOMINAN) has announced that it will pay a dividend of MYR0.01 per share on the 27th of March. This means the dividend yield will be fairly typical at 4.0%.
View our latest analysis for Dominant Enterprise Berhad
Dominant Enterprise Berhad’s Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Dominant Enterprise 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.
Looking forward, EPS could fall by 14.3% if the company can’t turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 49%, which is definitely feasible to continue.
Dividend Volatility
The company has a long dividend track record, but it doesn’t look great with cuts in the past. The dividend has gone from an annual total of MYR0.0417 in 2014 to the most recent total annual payment of MYR0.03. This works out to be a decline of approximately 3.2% per year 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.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Dominant Enterprise Berhad’s earnings per share has shrunk at 14% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Our Thoughts On Dominant Enterprise Berhad’s Dividend
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don’t think Dominant Enterprise Berhad is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Dominant Enterprise Berhad has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.