Glomac Berhad (KLSE:GLOMAC) has announced that it will pay a dividend of MYR0.01 per share on the 30th of December. The dividend yield will be 4.9% based on this payment which is still above the industry average.
Check out our latest analysis for Glomac Berhad
Glomac Berhad's Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Glomac Berhad's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 17.3%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was MYR0.0545, compared to the most recent full-year payment of MYR0.02. This works out to be a decline of approximately 9.5% per year over that time. 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.
The Dividend Has Growth Potential
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Glomac Berhad has been growing its earnings per share at 7.2% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In Summary
Overall, a consistent dividend is a good thing, and we think that Glomac Berhad has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Glomac Berhad that investors should take into consideration. Is Glomac Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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