Scientex Berhad (KLSE:SCIENTX) Is Increasing Its Dividend To MYR0.06

The board of Scientex Berhad (KLSE:SCIENTX) has announced that it will be paying its dividend of MYR0.06 on the 19th of July, an increased payment from last year's comparable dividend. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

View our latest analysis for Scientex Berhad

Scientex Berhad's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Scientex Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 27.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.0267 in 2014 to the most recent total annual payment of MYR0.12. This means that it has been growing its distributions at 16% per annum over that time. Scientex 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Scientex Berhad has grown earnings per share at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Scientex Berhad's prospects of growing its dividend payments in the future.

Scientex Berhad Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Scientex Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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