Hextar Global Berhad (KLSE:HEXTAR) Will Pay A Dividend Of MYR0.02

The board of Hextar Global Berhad (KLSE:HEXTAR) has announced that it will pay a dividend of MYR0.02 per share on the 3rd of April. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Hextar Global Berhad

Hextar Global Berhad's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Hextar Global Berhad's dividend made up quite a large proportion of earnings but only 42% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 18.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 64% which brings it into quite a comfortable range.

Hextar Global 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 3 years was MYR0.0448 in 2020, and the most recent fiscal year payment was MYR0.03. The dividend has fallen 33% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Hextar Global Berhad Could Grow Its Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Hextar Global Berhad has impressed us by growing EPS at 6.7% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Hextar Global Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Hextar Global 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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