Pantech Group Holdings Berhad (KLSE:PANTECH) Has Announced A Dividend Of MYR0.015

Pantech Group Holdings Berhad (KLSE:PANTECH) has announced that it will pay a dividend of MYR0.015 per share on the 15th of September. Based on this payment, the dividend yield on the company's stock will be 7.6%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Pantech Group Holdings Berhad

Pantech Group Holdings Berhad's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Pantech Group Holdings Berhad's dividend was only 42% of earnings, however it was paying out 236% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 17.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 54%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was MYR0.0292 in 2013, and the most recent fiscal year payment was MYR0.06. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Pantech Group Holdings Berhad has seen EPS rising for the last five years, at 17% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pantech Group Holdings Berhad's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Pantech Group Holdings Berhad (of which 1 is significant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.