Multi-Chem (SGX:AWZ) Is Increasing Its Dividend To SGD0.155

Multi-Chem Limited (SGX:AWZ) will increase its dividend on the 24th of May to SGD0.155, which is 40% higher than last year's payment from the same period of SGD0.111. This will take the dividend yield to an attractive 9.6%, providing a nice boost to shareholder returns.

View our latest analysis for Multi-Chem

Multi-Chem's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Multi-Chem's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 37.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was SGD0.044, compared to the most recent full-year payment of SGD0.199. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. Multi-Chem has seen EPS rising for the last five years, at 37% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Multi-Chem Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Multi-Chem is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Multi-Chem that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.