Wellcall Holdings Berhad (KLSE:WELLCAL) Is Due To Pay A Dividend Of MYR0.018

Wellcall Holdings Berhad's (KLSE:WELLCAL) investors are due to receive a payment of MYR0.018 per share on 30th of September. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.

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Wellcall Holdings Berhad's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Wellcall Holdings Berhad's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 1,580% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share is forecast to rise by 55.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Wellcall Holdings Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was MYR0.0553, compared to the most recent full-year payment of MYR0.082. This works out to be a compound annual growth rate (CAGR) of approximately 4.0% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Wellcall Holdings Berhad has been growing its earnings per share at 6.0% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Wellcall Holdings Berhad is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for Wellcall Holdings Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Wellcall Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.