Optimax Holdings Berhad (KLSE:OPTIMAX) Is Reducing Its Dividend To MYR0.006

Optimax Holdings Berhad (KLSE:OPTIMAX) is reducing its dividend to MYR0.006 on the 29th of Decemberwhich is 50% less than last year's comparable payment of MYR0.012. However, the dividend yield of 2.9% is still a decent boost to shareholder returns.

View our latest analysis for Optimax Holdings Berhad

Optimax Holdings Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Optimax Holdings Berhad was paying out a very large proportion of what it was earning and 107% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 43.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Optimax Holdings Berhad's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 2 years was MYR0.019 in 2021, and the most recent fiscal year payment was MYR0.018. This works out to be a decline of approximately 2.7% 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.

Dividend Growth Potential Is Shaky

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. Optimax Holdings Berhad's EPS has fallen by approximately 50% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Optimax Holdings Berhad's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Optimax Holdings Berhad is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 2 warning signs for Optimax Holdings 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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