Malaysia Smelting Corporation Berhad's (KLSE:MSC) Dividend Will Be MYR0.07

The board of Malaysia Smelting Corporation Berhad (KLSE:MSC) has announced that it will pay a dividend of MYR0.07 per share on the 27th of June. The dividend yield will be 3.5% based on this payment which is still above the industry average.

View our latest analysis for Malaysia Smelting Corporation Berhad

Malaysia Smelting Corporation Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Malaysia Smelting Corporation Berhad's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 71.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Malaysia Smelting Corporation Berhad's Dividend Has Lacked Consistency

It's comforting to see that Malaysia Smelting Corporation Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was MYR0.02 in 2017, and the most recent fiscal year payment was MYR0.07. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Malaysia Smelting Corporation Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Malaysia Smelting Corporation Berhad has been growing its earnings per share at 52% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Malaysia Smelting Corporation Berhad Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Malaysia Smelting Corporation Berhad that investors should take into consideration. Is Malaysia Smelting Corporation Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.