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

Sports Toto Berhad (KLSE:SPTOTO) is reducing its dividend from last year's comparable payment to MYR0.02 on the 18th of October. Despite the cut, the dividend yield of 4.4% will still be comparable to other companies in the industry.

View our latest analysis for Sports Toto Berhad

Sports Toto Berhad's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Sports Toto Berhad was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into 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 has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was MYR0.17, compared to the most recent full-year payment of MYR0.07. This works out to be a decline of approximately 8.5% per year 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 the track record hasn't been stellar, we really want to see earnings per share growing over time. Sports Toto Berhad hasn't seen much change in its earnings per share over the last five years.

In Summary

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 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 instance, we've picked out 2 warning signs for Sports Toto Berhad that investors should take into consideration. 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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