Globetronics Technology Bhd (KLSE:GTRONIC) Is Paying Out A Dividend Of MYR0.02

The board of Globetronics Technology Bhd (KLSE:GTRONIC) has announced that it will pay a dividend on the 7th of December, with investors receiving MYR0.02 per share. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Globetronics Technology Bhd

Globetronics Technology Bhd's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Globetronics Technology Bhd was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 76% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Earnings per share is forecast to rise by 4.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86% - on the higher side, but we wouldn't necessarily say this is unsustainable.

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. Since 2012, the annual payment back then was MYR0.0364, compared to the most recent full-year payment of MYR0.06. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Globetronics Technology Bhd might have put its house in order since then, but we remain cautious.

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. Globetronics Technology Bhd has seen EPS rising for the last five years, at 9.3% per annum. Globetronics Technology Bhd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Globetronics Technology Bhd's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Globetronics Technology Bhd has been making. Overall, we don't think this company has the makings of a good income 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. As an example, we've identified 1 warning sign for Globetronics Technology Bhd that you should be aware of before investing. Is Globetronics Technology Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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