Scicom (MSC) Berhad's (KLSE:SCICOM) Dividend Will Be MYR0.0125

Scicom (MSC) Berhad (KLSE:SCICOM) has announced that it will pay a dividend of MYR0.0125 per share on the 28th of June. The dividend yield will be 7.9% based on this payment which is still above the industry average.

View our latest analysis for Scicom (MSC) Berhad

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 9.0% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of MYR0.0333 in 2014 to the most recent total annual payment of MYR0.08. This means that it has been growing its distributions at 9.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Scicom (MSC) Berhad May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Scicom (MSC) Berhad has only grown its earnings per share at 4.8% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 97% of its profit. 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Scicom (MSC) Berhad's payments, as there could be some issues with sustaining them into the future. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Scicom (MSC) Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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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