Willowglen MSC Berhad (KLSE:WILLOW) Has Announced A Dividend Of MYR0.015

The board of Willowglen MSC Berhad (KLSE:WILLOW) has announced that it will pay a dividend of MYR0.015 per share on the 20th of May. This makes the dividend yield 4.3%, which will augment investor returns quite nicely.

View our latest analysis for Willowglen MSC Berhad

Willowglen MSC Berhad's Earnings Easily Cover The Distributions

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 0.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 71%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 most recent annual payment of MYR0.015 is about the same as the annual payment 10 years ago. 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.

The Dividend's Growth Prospects Are Limited

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. Although it's important to note that Willowglen MSC Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Willowglen MSC Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Willowglen MSC Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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