Scientex Berhad's (KLSE:SCIENTX) Dividend Will Be MYR0.06

Scientex Berhad (KLSE:SCIENTX) has announced that it will pay a dividend of MYR0.06 per share on the 23rd of January. This means the dividend yield will be fairly typical at 3.5%.

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Scientex Berhad's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Scientex Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 20.0%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Scientex Berhad

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was MYR0.035, compared to the most recent full-year payment of MYR0.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

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. Scientex Berhad has seen EPS rising for the last five years, at 6.2% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Scientex Berhad's Dividend

Overall, a consistent dividend is a good thing, and we think that Scientex Berhad has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Scientex Berhad that investors need to be conscious of moving forward. Is Scientex Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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