Aztech Global (SGX:8AZ) Is Paying Out Less In Dividends Than Last Year

Aztech Global Ltd. (SGX:8AZ) has announced that on 17th of May, it will be paying a dividend ofSGD0.015, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 5.5% will still be comparable to other companies in the industry.

See our latest analysis for Aztech Global

Aztech Global's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Aztech Global was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 68.1%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Aztech Global's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of SGD0.02 in 2021 to the most recent total annual payment of SGD0.045. This works out to be a compound annual growth rate (CAGR) of approximately 50% a year over that time. Aztech Global has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Aztech Global May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 4.5% per year. Growth of 4.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, we think that Aztech Global could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Aztech Global that investors need to be conscious of moving forward. 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.