Unimech Group Berhad (KLSE:UNIMECH) Will Pay A Dividend Of MYR0.039

Unimech Group Berhad (KLSE:UNIMECH) will pay a dividend of MYR0.039 on the 30th of July. However, the dividend yield of 3.8% still remains in a typical range for the industry.

Check out our latest analysis for Unimech Group Berhad

Unimech Group Berhad's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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.

If the trend of the last few years continues, EPS will grow by 8.0% over the next 12 months. 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

Although the company has a long dividend history, it has been cut 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. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

Unimech Group Berhad Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unimech Group Berhad has impressed us by growing EPS at 8.0% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Unimech Group Berhad's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Unimech Group Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think Unimech Group Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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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.

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