MMS Ventures Berhad (KLSE:MMSV) Has Affirmed Its Dividend Of MYR0.01

MMS Ventures Berhad (KLSE:MMSV) has announced that it will pay a dividend of MYR0.01 per share on the 18th of October. The dividend yield will be 3.7% based on this payment which is still above the industry average.

Check out our latest analysis for MMS Ventures Berhad

MMS Ventures Berhad Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, MMS Ventures Berhad's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, EPS could fall by 35.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 378%, which could put the dividend in jeopardy if the company's earnings don't improve.

MMS Ventures Berhad's Dividend Has Lacked Consistency

MMS Ventures Berhad has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of MYR0.016 in 2014 to the most recent total annual payment of MYR0.02. This means that it has been growing its distributions at 2.5% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 35% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 5 warning signs for MMS Ventures Berhad you should be aware of, and 1 of them makes us a bit uncomfortable. Is MMS Ventures Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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