Wellcall Holdings Berhad (KLSE:WELLCAL) Has Announced A Dividend Of RM0.014

By
Simply Wall St
Published
August 25, 2021
KLSE:WELLCAL
Source: Shutterstock

The board of Wellcall Holdings Berhad (KLSE:WELLCAL) has announced that it will pay a dividend of RM0.014 per share on the 24th of September. The dividend yield will be 5.5% based on this payment which is still above the industry average.

See our latest analysis for Wellcall Holdings Berhad

Wellcall Holdings Berhad's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Wellcall Holdings Berhad's dividend made up quite a large proportion of earnings but only 57% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 22.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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KLSE:WELLCAL Historic Dividend August 25th 2021

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was RM0.029 in 2011, and the most recent fiscal year payment was RM0.05. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wellcall Holdings Berhad might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Wellcall Holdings Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Wellcall Holdings Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Taking the debate a bit further, we've identified 1 warning sign for Wellcall Holdings Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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