Dialog Group Berhad (KLSE:DIALOG) Is Increasing Its Dividend To MYR0.021

Dialog Group Berhad's (KLSE:DIALOG) periodic dividend will be increasing on the 20th of December to MYR0.021, with investors receiving 11% more than last year's MYR0.019. This makes the dividend yield about the same as the industry average at 1.7%.

Our analysis indicates that DIALOG is potentially overvalued!

Dialog Group Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Dialog Group Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 25.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% 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. The annual payment during the last 10 years was MYR0.0145 in 2012, and the most recent fiscal year payment was MYR0.034. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Dialog Group Berhad's Dividend Growing

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. We are encouraged to see that Dialog Group Berhad has grown earnings per share at 5.5% per year over the past five years. Dialog Group Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 1 warning sign for Dialog Group Berhad that you should be aware of before investing. Is Dialog Group Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.