Sports Toto Berhad's (KLSE:SPTOTO) Dividend Will Be Increased To MYR0.03

Sports Toto Berhad (KLSE:SPTOTO) will increase its dividend from last year's comparable payment on the 19th of July to MYR0.03. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Sports Toto Berhad

Sports Toto Berhad's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. 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.

Looking forward, earnings per share is forecast to rise by 9.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% 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 annual payment back then was MYR0.185, compared to the most recent full-year payment of MYR0.04. This works out to a decline of approximately 78% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Sports Toto Berhad has seen earnings per share falling at 4.6% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Sports Toto Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.