Ornapaper Berhad (KLSE:ORNA) Is Paying Out A Dividend Of MYR0.02
The board of Ornapaper Berhad (KLSE:ORNA) has announced that it will pay a dividend on the 20th of May, with investors receiving MYR0.02 per share. This means that the annual payment will be 2.2% of the current stock price, which is in line with the average for the industry.
We've discovered 2 warning signs about Ornapaper Berhad. View them for free.
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Ornapaper Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
EPS is set to fall by 15.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 30%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
View our latest analysis for Ornapaper Berhad
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.05 in 2015 to the most recent total annual payment of MYR0.02. Doing the maths, this is a decline of about 8.8% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Ornapaper Berhad's EPS has fallen by approximately 16% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Ornapaper Berhad you should be aware of, and 1 of them is concerning. Is Ornapaper Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.
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