REDtone Digital Berhad's (KLSE:REDTONE) Dividend Will Be MYR0.018

The board of REDtone Digital Berhad (KLSE:REDTONE) has announced that it will pay a dividend on the 22nd of November, with investors receiving MYR0.018 per share. This means the dividend yield will be fairly typical at 4.2%.

See our latest analysis for REDtone Digital Berhad

REDtone Digital Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, REDtone Digital Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 45.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

REDtone Digital Berhad's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2013, the annual payment back then was MYR0.015, compared to the most recent full-year payment of MYR0.018. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

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. REDtone Digital Berhad has seen EPS rising for the last five years, at 46% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like REDtone Digital Berhad's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 2 warning signs for REDtone Digital Berhad that investors should know about before committing capital to this stock. Is REDtone Digital Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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