Scicom (MSC) Berhad (KLSE:SCICOM) Has Affirmed Its Dividend Of RM0.015

Scicom (MSC) Berhad (KLSE:SCICOM) has announced that it will pay a dividend of RM0.015 per share on the 29th of September. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Scicom (MSC) Berhad

Scicom (MSC) Berhad's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Scicom (MSC) Berhad's dividend made up quite a large proportion of earnings but only 69% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 14.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.015 in 2011, and the most recent fiscal year payment was RM0.06. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Scicom (MSC) Berhad's earnings per share has fallen at approximately 9.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Scicom (MSC) Berhad's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Scicom (MSC) 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 performing dividend stock.

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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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