Uchi Technologies Berhad (KLSE:UCHITEC) Will Pay A Dividend Of MYR0.08

Uchi Technologies Berhad (KLSE:UCHITEC) will pay a dividend of MYR0.08 on the 27th of December. The dividend yield of 7.4% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Uchi Technologies Berhad

Estimates Indicate Uchi Technologies Berhad's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 106% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 0.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 107%, which probably can't continue without putting some pressure on the balance sheet.

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 annual payment during the last 10 years was MYR0.0909 in 2014, and the most recent fiscal year payment was MYR0.295. This means that it has been growing its distributions at 12% per annum over that time. 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.

Uchi Technologies Berhad Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Uchi Technologies Berhad has grown earnings per share at 10% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

The Dividend Could Prove To Be Unreliable

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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Uchi Technologies Berhad that investors should take into consideration. Is Uchi Technologies Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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