Asia File Corporation Bhd's (KLSE:ASIAFLE) Upcoming Dividend Will Be Larger Than Last Year's

Asia File Corporation Bhd. (KLSE:ASIAFLE) will increase its dividend from last year's comparable payment on the 26th of October to MYR0.035. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

Check out our latest analysis for Asia File Corporation Bhd

Asia File Corporation Bhd's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too 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.

The next year is set to see EPS grow by 61.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.134, compared to the most recent full-year payment of MYR0.035. This works out to a decline of approximately 74% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Asia File Corporation Bhd's EPS has declined at around 12% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Asia File Corporation Bhd's Dividend

Overall, we always like to see the dividend being raised, but we don't think Asia File Corporation Bhd will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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 Asia File Corporation Bhd that investors should take into consideration. Is Asia File Corporation Bhd 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.