Matrix Concepts Holdings Berhad (KLSE:MATRIX) Will Pay A Smaller Dividend Than Last Year

Matrix Concepts Holdings Berhad (KLSE:MATRIX) has announced that on 10th of April, it will be paying a dividend ofMYR0.0135, which a reduction from last year's comparable dividend. However, the dividend yield of 5.4% is still a decent boost to shareholder returns.

Check out our latest analysis for Matrix Concepts Holdings Berhad

Matrix Concepts Holdings Berhad's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Matrix Concepts Holdings Berhad was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 27.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MYR0.0406 in 2015, and the most recent fiscal year payment was MYR0.0733. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year 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.

Matrix Concepts Holdings Berhad May Find It Hard To Grow The Dividend

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. Over the past five years, it looks as though Matrix Concepts Holdings Berhad's EPS has declined at around 2.5% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Matrix Concepts Holdings Berhad's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Matrix Concepts Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think Matrix Concepts Holdings Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Matrix Concepts Holdings Berhad (of which 1 is a bit unpleasant!) you should know about. Is Matrix Concepts Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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