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Suria Capital Holdings Berhad (KLSE:SURIA) cuts its dividend to MYR 0.015

Suria Capital Holdings Berhad (KLSE:SURIA) has announced that it will pay a dividend of MYR0.015 on July 26, which is a reduction from last year’s comparable dividend. This means that the dividend yield is 1.8%, which is a bit low compared to other companies in the sector.

See our latest analysis for Suria Capital Holdings Berhad

Suria Capital Holdings Berhad’s dividend is well covered by profits

If predictable over a long period of time, even low dividend yields can be attractive. However, before this announcement, Suria Capital Holdings Berhad’s dividend was more than covered by both cash flow and earnings. This means that most of what the company earns is used to grow it.

In the coming year, earnings per share are expected to increase by 87.4%. If the dividend continues to follow recent trends, we estimate the payout ratio will be 18%, which is within the range that reassures us about the sustainability of the dividend.

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Dividend volatility

Although the company has been paying dividends for quite some time, it has cut the dividend at least once in the last decade. The annual payment for the past 10 years was MYR 0.0525 in 2014, and the most recent payment in the financial year was MYR 0.035. This amounts to a decline of approximately 4.0% per year over that period. Falling dividends are generally not what we look for, as they can indicate that the company is facing some challenges.

Dividend growth can be difficult to achieve

Growing earnings per share could be a mitigating factor if we consider past dividend fluctuations. It looks like Suria Capital Holdings Berhad’s earnings per share have fallen about 8.3% per year over the past five years. If profits continue to decline, the company may have to make the difficult choice of cutting or even eliminating the dividend altogether – the opposite of dividend growth. Earnings are forecast to grow in the coming year, but we remain cautious until a track record of earnings growth is established.

In summary

In summary, cutting dividends isn’t ideal, but it can bring the payout into a more sustainable range. The company generates enough cash that the dividend could be maintained for a while, but the track record isn’t great. Overall, we don’t think this company has the makings of a good earnings share.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than companies with an erratic dividend policy. However, there are other things investors should consider when analyzing stock performance. For example, we figured out 1 warning sign for Suria Capital Holdings Berhad that investors should take into account. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.