Why You Might Be Interested In Pantech Group Holdings Berhad (KLSE:PANTECH) For Its Upcoming Dividend

By
Simply Wall St
Published
February 21, 2022
KLSE:PANTECH
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Readers hoping to buy Pantech Group Holdings Berhad (KLSE:PANTECH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Pantech Group Holdings Berhad's shares on or after the 25th of February will not receive the dividend, which will be paid on the 25th of March.

The company's next dividend payment will be RM0.01 per share. Last year, in total, the company distributed RM0.04 to shareholders. Based on the last year's worth of payments, Pantech Group Holdings Berhad has a trailing yield of 5.9% on the current stock price of MYR0.68. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Pantech Group Holdings Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for Pantech Group Holdings Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Pantech Group Holdings Berhad paid out a comfortable 36% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 92% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.

Pantech Group Holdings Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Pantech Group Holdings Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
KLSE:PANTECH Historic Dividend February 21st 2022

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Pantech Group Holdings Berhad, with earnings per share up 8.4% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Pantech Group Holdings Berhad has delivered an average of 3.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Pantech Group Holdings Berhad got what it takes to maintain its dividend payments? Pantech Group Holdings Berhad delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 92% of its cash flow over the last year, which is a mediocre outcome. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that being said, if dividends aren't your biggest concern with Pantech Group Holdings Berhad, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for Pantech Group Holdings Berhad (of which 1 is a bit concerning!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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