Far East Holdings Berhad (KLSE:FAREAST) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of January to MYR0.08. This makes the dividend yield about the same as the industry average at 4.3%.
Far East Holdings Berhad's Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Far East Holdings Berhad's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS could expand by 11.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from MYR0.0714 total annually to MYR0.16. This means that it has been growing its distributions at 8.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Far East Holdings Berhad has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Far East Holdings Berhad's prospects of growing its dividend payments in the future.
Far East Holdings Berhad Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Far East Holdings Berhad is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. For example, we've picked out 1 warning sign for Far East Holdings Berhad that investors should know about before committing capital to this stock. 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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