Alcom Group Berhad (KLSE:ALCOM) Has Announced That It Will Be Increasing Its Dividend To MYR0.04

Alcom Group Berhad's (KLSE:ALCOM) dividend will be increasing from last year's payment of the same period to MYR0.04 on 26th of July. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for Alcom Group Berhad

Alcom 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. Before making this announcement, Alcom Group Berhad was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 36.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The dividend has gone from an annual total of MYR0.05 in 2014 to the most recent total annual payment of MYR0.04. This works out to be a decline of approximately 2.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Alcom Group Berhad has been growing its earnings per share at 36% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Alcom Group Berhad Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Alcom Group Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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