Celcomdigi Berhad (KLSE:CDB) Is Due To Pay A Dividend Of MYR0.037

The board of Celcomdigi Berhad (KLSE:CDB) has announced that it will pay a dividend of MYR0.037 per share on the 30th of June. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

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Celcomdigi Berhad's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise by 58.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Celcomdigi Berhad

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. Since 2015, the annual payment back then was MYR0.26, compared to the most recent full-year payment of MYR0.148. Doing the maths, this is a decline of about 5.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Celcomdigi Berhad's EPS has declined at around 8.4% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Celcomdigi Berhad's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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. Case in point: We've spotted 2 warning signs for Celcomdigi Berhad (of which 1 is potentially serious!) you should know about. Is Celcomdigi Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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