MTAG Group Berhad (KLSE:MTAG) Has Re-Affirmed Its Dividend Of RM0.02

The board of MTAG Group Berhad (KLSE:MTAG) has announced that it will pay a dividend of RM0.02 per share on the 21st of June. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

See our latest analysis for MTAG Group Berhad

MTAG Group Berhad's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 129% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 29.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

MTAG Group Berhad's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the first annual payment was RM0.02, compared to the most recent full-year payment of RM0.03. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though MTAG Group Berhad's EPS has declined at around 65% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

MTAG Group Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While MTAG Group Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 2 warning signs for MTAG Group 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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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.