VSTECS Berhad's (KLSE:VSTECS) Dividend Will Be MYR0.025

The board of VSTECS Berhad (KLSE:VSTECS) has announced that it will pay a dividend on the 12th of January, with investors receiving MYR0.025 per share. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.

View our latest analysis for VSTECS Berhad

VSTECS 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. However, prior to this announcement, VSTECS Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 17.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.025 in 2013 to the most recent total annual payment of MYR0.062. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year 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. VSTECS Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. VSTECS Berhad has impressed us by growing EPS at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for VSTECS Berhad's prospects of growing its dividend payments in the future.

We Really Like VSTECS Berhad's Dividend

Overall, we like to see the dividend staying consistent, and we think VSTECS Berhad might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for VSTECS Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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