Magni-Tech Industries Berhad's (KLSE:MAGNI)'s dividend will increase to RM0.035 on April 18 from the same period paid last year. Although the dividend is high, the yield is below the industry average at just 4.0%.
Check out our latest analysis for Magni-Tech Industries Berhad.
Magni-Tech Industries Berhad's dividend is well covered by profit.
While yield is important, another factor to consider about a company's dividend is whether the company's current dividend levels are achievable. Based on the last payout, Magni-Tech Industries Berhad only paid out a fraction of its earnings, which amounted to 226% of its cash flow. Having such a high cash payout ratio puts pressure on the company's dividend, and could be forced to cut it if conditions become tough in the future.
If recent trends continue, EPS could expand by 3.5% over the next 12 months. If dividends continue in line with recent trends, the dividend payout ratio is expected to be 44%, which is within a sufficiently satisfactory range for dividend sustainability.
Dividend volatility
The company has a long history of paying dividends, but the dividend has been cut at least once in the past 10 years. Since 2014, his annual payment at the time was RM0.0275, while his recent annual payment was RM0.09. This means that the company grew its distribution at approximately 13% per year over that period. Magni-Tech Industries Berhad has grown its dividend rapidly, despite cutting it at least once in the past. Companies that have cut back often tend to cut back again, so I would be wary of buying this stock solely for the dividend income.
Dividend growth prospects are limited
Earnings per share growth could be a mitigating factor, given historical dividend movements. Earnings have been growing at about 3.5% a year over the past five years, which isn't huge, but still better than shrinking. Although the growth rate may be lower, Magnitec Industries Berhad could always pay out a higher percentage of its revenue to increase shareholder returns.
In summary
The dividend is increasing at the moment, but overall this is probably not a great return stock. With a lack of cash flow, it's hard to see how the company will be able to maintain its dividend payments. You'll probably look elsewhere for more profitable investments.
Investors generally prefer companies with consistent and stable dividend policies over companies with irregular dividend policies. On the other hand, despite the importance of dividends, they are not the only factor that our readers need to know when evaluating a company. For example, we identified 3 warning signs for Magni-Tech Industries Berhad (Two can be serious!) Here's what you need to know before investing. Is Magni-Tech Industries Berhad the opportunity you've been looking for? Why not check it out? Selection of high dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This 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 long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
