Teo Seng Capital Berhad (KLSE:TEOSENG) Will Pay A Dividend Of MYR0.015

Teo Seng Capital Berhad (KLSE:TEOSENG) has announced that it will pay a dividend of MYR0.015 per share on the 25th of June. This makes the dividend yield 7.9%, which will augment investor returns quite nicely.

Our free stock report includes 2 warning signs investors should be aware of before investing in Teo Seng Capital Berhad. Read for free now.

Teo Seng Capital Berhad's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Teo Seng Capital Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 37.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Teo Seng Capital Berhad

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 2015, the dividend has gone from MYR0.0333 total annually to MYR0.08. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Teo Seng Capital Berhad has impressed us by growing EPS at 37% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Teo Seng Capital Berhad's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Teo Seng Capital Berhad (1 doesn't sit too well with us!) that you should be aware of before investing. Is Teo Seng Capital Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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