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Uchi Technologies Berhad's (KLSE:UCHITEC) Upcoming Dividend Will Be Larger Than Last Year's
The board of Uchi Technologies Berhad (KLSE:UCHITEC) has announced that it will be paying its dividend of MYR0.12 on the 19th of January, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 7.1%, providing a nice boost to shareholder returns.
View our latest analysis for Uchi Technologies Berhad
Uchi Technologies Berhad Is Paying Out More Than It Is Earning
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Uchi Technologies Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 97% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.
Over the next year, EPS is forecast to fall by 1.1%. If the dividend continues along recent trends, we estimate the payout ratio could reach 100%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from MYR0.109 total annually to MYR0.24. This means that it has been growing its distributions at 8.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Uchi Technologies Berhad might have put its house in order since then, but we remain 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. Uchi Technologies Berhad has impressed us by growing EPS at 12% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited 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. 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. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs 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.
About KLSE:UCHITEC
Uchi Technologies Berhad
An investment holding company, engages in the research, design, development, manufacture, and sale of electronic control systems in Switzerland, Portugal, Germany, the United Kingdom, China, the United States, and internationally.
Flawless balance sheet, undervalued and pays a dividend.