Nanofilm Technologies International Limited's (SGX:MZH) dividend is being reduced by 70% to SGD0.0033 per share on 8th of September, in comparison to last year's comparable payment of SGD0.011. This means that the dividend yield is 2.2%, which is a bit low when comparing to other companies in the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Nanofilm Technologies International's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
View our latest analysis for Nanofilm Technologies International
Nanofilm Technologies International's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Nanofilm Technologies International was paying only paying out a fraction of earnings, but the payment was a massive 126% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to rise by 48.6% over the next year. If the dividend continues on this path, the payout ratio could be 5.2% by next year, which we think can be pretty sustainable going forward.
Nanofilm Technologies International Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was SGD0.02 in 2021, and the most recent fiscal year payment was SGD0.022. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
Nanofilm Technologies International May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.9% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Nanofilm Technologies International could always pay out a higher proportion of earnings to increase shareholder returns.