Yahoo Finance S P Setia Berhad (KLSE:SPSETIA) Is Reducing Its Dividend To MYR0.0134
The board of S P Setia Berhad (KLSE:SPSETIA) has announced that the dividend on 23rd of April will be reduced by 8.8% from last year's MYR0.0147 to MYR0.0134. This means that the annual payment is 1.2% of the current stock price, which is lower than what the rest of the industry is paying.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that S P Setia Berhad's stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for S P Setia Berhad
S P Setia Berhad's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, S P Setia Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 35.4%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.
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 MYR0.14 in 2014 to the most recent total annual payment of MYR0.0134. Dividend payments have fallen sharply, down 90% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though S P Setia Berhad's EPS has declined at around 21% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Our Thoughts On S P Setia Berhad's Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for S P Setia Berhad (of which 1 doesn't sit too well with us!) you should know about. Is S P Setia Berhad 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.
