Hextar Global Berhad's (KLSE:HEXTAR) Dividend Will Be MYR0.005

Hextar Global Berhad's (KLSE:HEXTAR) investors are due to receive a payment of MYR0.005 per share on 3rd of October. Including this payment, the dividend yield on the stock will be 1.8%, which is a modest boost for shareholders' returns.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Hextar Global Berhad's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Hextar Global Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 150% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 19.7%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 82% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Hextar Global Berhad

Hextar Global Berhad's Dividend Has Lacked Consistency

Hextar Global Berhad has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the dividend has gone from MYR0.0149 total annually to MYR0.016. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Hextar Global Berhad has impressed us by growing EPS at 9.4% 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.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good 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. As an example, we've identified 1 warning sign for Hextar Global Berhad that you should be aware of before investing. Is Hextar Global Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.