Celcomdigi Berhad's (KLSE:CDB) Shareholders Will Receive A Bigger Dividend Than Last Year

Celcomdigi Berhad (KLSE:CDB) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to MYR0.037. The payment will take the dividend yield to 4.2%, which is in line with the average for the industry.

Check out our latest analysis for Celcomdigi Berhad

Celcomdigi Berhad's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to rise by 66.3% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 68% which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.213 in 2015 to the most recent total annual payment of MYR0.148. This works out to be a decline of approximately 3.6% per year over that time. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Celcomdigi Berhad's earnings per share has fallen at approximately 8.6% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Celcomdigi Berhad's Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. 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. We don't think that this is a great candidate to be an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 a bit unpleasant!) you should know about. 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.