Suria Capital Holdings Berhad (KLSE:SURIA) is reducing its dividend from last year’s comparable payment to MYR0.015 on the 26th of July. Based on this payment, the dividend yield will be 1.8%, which is lower than the average for 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 its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 54.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

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 MYR0.0513 in 2014 to the most recent total annual payment of MYR0.035. The dividend has shrunk at around 3.8% a year during that period. 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.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Suria Capital Holdings Berhad has seen earnings per share falling at 6.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It’s not all bad news though, as the earnings are predicted to rise over the next 12 months – we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Suria Capital Holdings Berhad’s Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we’ve identified 1 warning sign for Suria Capital Holdings Berhad that you should be aware of before investing. Is Suria Capital Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Story continues

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com