Pantech Group Holdings Berhad (KLSE:PANTECH) Is Increasing Its Dividend To RM0.015

The board of Pantech Group Holdings Berhad (KLSE:PANTECH) has announced that it will be increasing its dividend on the 9th of September to RM0.015. This makes the dividend yield 6.7%, which is above the industry average.

See our latest analysis for Pantech Group Holdings Berhad

Pantech Group Holdings Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Pantech Group Holdings Berhad's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 0.9% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 49%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from RM0.023 in 2012 to the most recent annual payment of RM0.06. This means that it has been growing its distributions at 9.9% per annum 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

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. It's encouraging to see Pantech Group Holdings Berhad has been growing its earnings per share at 17% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Pantech Group Holdings Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Pantech Group Holdings Berhad will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Pantech Group Holdings Berhad that investors should take into consideration. Is Pantech Group Holdings 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.