Yahoo Finance Muda Holdings Berhad's (KLSE:MUDA) Dividend Will Be Reduced To MYR0.03
Muda Holdings Berhad (KLSE:MUDA) has announced that on 24th of July, it will be paying a dividend ofMYR0.03, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 2.1%, which is lower than the average for the industry.
Check out our latest analysis for Muda Holdings Berhad
Muda Holdings Berhad's Distributions May Be Difficult To Sustain
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even though Muda Holdings Berhad isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
EPS has fallen by an average of 42.4% in the past, so this could continue over the next year. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The payments haven't really changed that much since 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
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. Muda Holdings Berhad's EPS has fallen by approximately 42% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Muda Holdings Berhad's Dividend Doesn't Look Sustainable
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. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Muda Holdings Berhad you should be aware of, and 2 of them are concerning. 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.
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