Wellcall Holdings Berhad (KLSE:WELLCAL) Is Paying Out A Dividend Of MYR0.014

The board of Wellcall Holdings Berhad (KLSE:WELLCAL) has announced that it will pay a dividend of MYR0.014 per share on the 24th of March. The dividend yield will be 5.2% based on this payment which is still above the industry average.

See our latest analysis for Wellcall Holdings Berhad

Wellcall Holdings Berhad's Earnings Easily Cover The Distributions

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 was paying out 87% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Earnings per share is forecast to rise by 39.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was MYR0.0347 in 2013, and the most recent fiscal year payment was MYR0.06. This means that it has been growing its distributions at 5.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Wellcall Holdings Berhad May Find It Hard To Grow The 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. Unfortunately, Wellcall Holdings Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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