MISC Berhad (KLSE:MISC) Has Announced A Dividend Of MYR0.07

MISC Berhad's (KLSE:MISC) investors are due to receive a payment of MYR0.07 per share on 14th of December. The dividend yield is 4.6% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for MISC Berhad

MISC Berhad's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, MISC Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 54,760% 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.

The next year is set to see EPS grow by 39.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 65% which would be quite comfortable going to take the dividend forward.

MISC Berhad Doesn't Have A Long Payment History

It is great to see that MISC Berhad has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2013, the annual payment back then was MYR0.05, compared to the most recent full-year payment of MYR0.33. This means that it has been growing its distributions at 23% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. MISC Berhad has seen earnings per share falling at 7.7% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

MISC Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for MISC Berhad that investors need to be conscious of moving forward. Is MISC Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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