Wellcall Holdings Berhad's (KLSE:WELLCAL) Dividend Will Be MYR0.026

Wellcall Holdings Berhad (KLSE:WELLCAL) has announced that it will pay a dividend of MYR0.026 per share on the 23rd of December. The dividend yield will be 5.0% based on this payment which is still above the industry average.

Check out the opportunities and risks within the MY Machinery industry.

Wellcall Holdings Berhad's Payment Has 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, the company was paying out 108% of what it was earning and 87% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Over the next year, EPS is forecast to expand by 49.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 75% which would be quite comfortable going to take the dividend forward.

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. The dividend has gone from an annual total of MYR0.032 in 2012 to the most recent total annual payment of MYR0.06. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. 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.

Wellcall Holdings Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Wellcall Holdings Berhad hasn't seen much change in its earnings per share over the last five years.

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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Wellcall Holdings Berhad that investors should take into consideration. 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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