Scicom (MSC) Berhad (KLSE:SCICOM) Is Due To Pay A Dividend Of MYR0.0125

Scicom (MSC) Berhad (KLSE:SCICOM) has announced that it will pay a dividend of MYR0.0125 per share on the 30th of September. The yield is still above the industry average at 5.4%.

View our latest analysis for Scicom (MSC) Berhad

Scicom (MSC) Berhad's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 92% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 45.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 65% which brings it into quite a comfortable range.

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 MYR0.0333 in 2014, and the most recent fiscal year payment was MYR0.05. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Scicom (MSC) Berhad 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. However, Scicom (MSC) Berhad has only grown its earnings per share at 3.8% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Scicom (MSC) Berhad that investors need to be conscious of moving forward. Is Scicom (MSC) Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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