Willowglen MSC Berhad (KLSE:WILLOW) Has Affirmed Its Dividend Of MYR0.015

Willowglen MSC Berhad (KLSE:WILLOW) will pay a dividend of MYR0.015 on the 18th of May. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Willowglen MSC Berhad

Willowglen MSC Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Willowglen MSC Berhad's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, EPS could fall by 3.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 54%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.0125 in 2013 to the most recent total annual payment of MYR0.015. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Willowglen MSC Berhad's earnings per share has shrunk at approximately 3.8% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Willowglen MSC Berhad's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Willowglen MSC Berhad's payments, as there could be some issues with sustaining them into the future. While Willowglen MSC Berhad is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Willowglen MSC Berhad you should be aware of, and 1 of them is a bit concerning. Is Willowglen MSC Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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