Nova Wellness Group Berhad (KLSE:NOVA) Is Increasing Its Dividend To MYR0.0205

The board of Nova Wellness Group Berhad (KLSE:NOVA) has announced that the dividend on 16th of March will be increased to MYR0.0205, which will be 2.5% higher than last year's payment of MYR0.02 which covered the same period. This makes the dividend yield 3.7%, which is above the industry average.

See our latest analysis for Nova Wellness Group Berhad

Nova Wellness Group Berhad's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Nova Wellness Group Berhad's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 64.9%. If the dividend continues on this path, the payout ratio could be 8.9% by next year, which we think can be pretty sustainable going forward.

Nova Wellness Group Berhad's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the annual payment back then was MYR0.018, compared to the most recent full-year payment of MYR0.033. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Nova Wellness Group Berhad Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nova Wellness Group Berhad has impressed us by growing EPS at 9.4% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Nova Wellness Group Berhad is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Nova Wellness Group Berhad (1 shouldn't be ignored!) 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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