Scicom (MSC) Berhad (KLSE:SCICOM) Is Paying Out A Dividend Of MYR0.02

The board of Scicom (MSC) Berhad (KLSE:SCICOM) has announced that it will pay a dividend of MYR0.02 per share on the 25th of March. The dividend yield will be 7.3% based on this payment which is still above the industry average.

See our latest analysis for Scicom (MSC) Berhad

Scicom (MSC) 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. Prior to this announcement, the company was paying out 97% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next year is set to see EPS grow by 32.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 75%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.0333 in 2014, and the most recent fiscal year payment was MYR0.08. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% 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. Scicom (MSC) Berhad might have put its house in order since then, but we remain cautious.

Scicom (MSC) 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. Earnings per share has been crawling upwards at 4.8% per year. So the company has struggled to grow its EPS yet it's still paying out 97% of its earnings. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

Scicom (MSC) 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. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Scicom (MSC) Berhad you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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