Sports Toto Berhad's (KLSE:SPTOTO) Dividend Is Being Reduced To MYR0.02

Sports Toto Berhad (KLSE:SPTOTO) has announced that on 18th of October, it will be paying a dividend ofMYR0.02, which a reduction from last year's comparable dividend. This means that the annual payment will be 4.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Sports Toto Berhad

Sports Toto Berhad's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Sports Toto Berhad was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 11.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from MYR0.17 total annually to MYR0.07. This works out to be a decline of approximately 8.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, Sports Toto Berhad's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Sports Toto Berhad's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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.

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. 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. Is Sports Toto Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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