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The board of DXN Holdings Bhd. (KLSE:DXN) has announced that the dividend on 29th of November will be reduced by 11% from last year’s MYR0.009 to MYR0.008. The yield is still above the industry average at 6.8%.
Check out our latest analysis for DXN Holdings Bhd
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Based on the last payment, DXN Holdings Bhd 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.
Over the next year, EPS is forecast to expand by 44.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 9.2%, which is in the range that makes us comfortable with the sustainability of the dividend.
It is tough to make a judgement on how stable a dividend is when the company hasn’t been paying one for very long. This doesn’t mean that the company can’t pay a good dividend, but just that we want to wait until it can prove itself.
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. DXN Holdings Bhd is struggling to find viable investments, so it is returning more to shareholders. This isn’t necessarily bad, but we wouldn’t expect rapid dividend growth in the future.
Even though the dividend was cut this year, we think DXN Holdings Bhd has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn’t translated into a consistent payment. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for DXN Holdings Bhd that investors should take into consideration. Is DXN Holdings Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.