Boilermech Holdings Berhad (KLSE:BOILERM) Has Affirmed Its Dividend Of MYR0.0175

The board of Boilermech Holdings Berhad (KLSE:BOILERM) has announced that it will pay a dividend of MYR0.0175 per share on the 13th of September. This means that the annual payment will be 2.3% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Boilermech Holdings Berhad

Boilermech Holdings Berhad's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by Boilermech Holdings Berhad's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 119.9%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.015 in 2013 to the most recent total annual payment of MYR0.0175. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

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. In the last five years, Boilermech Holdings Berhad's earnings per share has shrunk at approximately 7.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Boilermech Holdings Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 3 warning signs for Boilermech Holdings Berhad that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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 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.