Glomac Berhad's (KLSE:GLOMAC) Dividend Is Being Reduced To MYR0.0125

Glomac Berhad (KLSE:GLOMAC) has announced that on 22nd of December, it will be paying a dividend ofMYR0.0125, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 3.4% will still be comparable to other companies in the industry.

Check out our latest analysis for Glomac Berhad

Glomac Berhad's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Glomac Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 33.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of MYR0.05 in 2013 to the most recent total annual payment of MYR0.0125. This works out to a decline of approximately 75% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Unfortunately, Glomac Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. For example, we've picked out 3 warning signs for Glomac Berhad that investors should know about before committing capital to this stock. Is Glomac Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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