Asia File Corporation Bhd (KLSE:ASIAFLE) Has Announced A Dividend Of MYR0.035

Asia File Corporation Bhd. (KLSE:ASIAFLE) has announced that it will pay a dividend of MYR0.035 per share on the 24th of October. Based on this payment, the dividend yield on the company's stock will be 5.2%, which is an attractive boost to shareholder returns.

View our latest analysis for Asia File Corporation Bhd

Asia File Corporation Bhd's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Asia File Corporation Bhd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 14.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 41%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 MYR0.128 in 2014, and the most recent fiscal year payment was MYR0.105. Doing the maths, this is a decline of about 2.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Asia File Corporation Bhd May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Asia File Corporation Bhd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Asia File Corporation Bhd's Dividend

Overall, a consistent dividend is a good thing, and we think that Asia File Corporation Bhd has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Asia File Corporation Bhd has 3 warning signs (and 1 which is potentially serious) we think you should know about. 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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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.