Uchi Technologies Berhad's (KLSE:UCHITEC) Shareholders Will Receive A Bigger Dividend Than Last Year

Uchi Technologies Berhad (KLSE:UCHITEC) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to MYR0.09. This will take the dividend yield to an attractive 6.6%, providing a nice boost to shareholder returns.

View our latest analysis for Uchi Technologies Berhad

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 9.8%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 126% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.0909 in 2015 to the most recent total annual payment of MYR0.245. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

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. Uchi Technologies Berhad has impressed us by growing EPS at 7.8% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

Uchi Technologies Berhad's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Uchi Technologies Berhad will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 1 warning sign for Uchi Technologies Berhad that investors should know about before committing capital to this stock. 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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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.