Sports Toto Berhad (KLSE:SPTOTO) Is Increasing Its Dividend To MYR0.03

Sports Toto Berhad's (KLSE:SPTOTO) dividend will be increasing from last year's payment of the same period to MYR0.03 on 19th of July. Based on this payment, the dividend yield for the company will be 3.9%, which is fairly typical for the industry.

See our latest analysis for Sports Toto Berhad

Sports Toto Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Sports Toto Berhad's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 10.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2014, the annual payment back then was MYR0.185, compared to the most recent full-year payment of MYR0.06. Dividend payments have fallen sharply, down 68% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Sports Toto Berhad May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that Sports Toto Berhad's earnings per share has fallen at approximately 4.6% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.

Our Thoughts On Sports Toto Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sports Toto Berhad's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Sports Toto 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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