The board of MTAG Group Berhad (KLSE:MTAG) has announced that it will pay a dividend on the 20th of December, with investors receiving MYR0.01 per share. Based on this payment, the dividend yield on the company's stock will be 5.8%, which is an attractive boost to shareholder returns.
View our latest analysis for MTAG Group Berhad
MTAG Group Berhad's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, MTAG Group Berhad is earning enough to cover the payment, but then it makes up 109% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
The next year is set to see EPS grow by 34.0%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
MTAG Group Berhad's Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. Since 2019, the annual payment back then was MYR0.02, compared to the most recent full-year payment of MYR0.03. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. MTAG Group Berhad's earnings per share has shrunk at 64% a year over 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about MTAG Group Berhad's payments, as there could be some issues with sustaining them into the future. While MTAG Group Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 3 warning signs for MTAG Group Berhad you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.