Unimech Group Berhad (KLSE:UNIMECH) Is Due To Pay A Dividend Of MYR0.039

Unimech Group Berhad's (KLSE:UNIMECH) investors are due to receive a payment of MYR0.039 per share on 30th of July. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Unimech Group Berhad

Unimech Group Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Unimech Group Berhad was paying only paying out a fraction of earnings, but the payment was a massive 95% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 8.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was MYR0.06, compared to the most recent full-year payment of MYR0.059. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unimech Group Berhad has seen EPS rising for the last five years, at 8.0% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Unimech Group Berhad's prospects of growing its dividend payments in the future.

Our Thoughts On Unimech Group Berhad's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Unimech Group Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Unimech Group Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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