The board of Pantech Group Holdings Berhad (KLSE:PANTECH) has announced that it will pay a dividend on the 15th of September, with investors receiving MYR0.015 per share. This makes the dividend yield 7.1%, which will augment investor returns quite nicely.
View our latest analysis for Pantech Group Holdings Berhad
Pantech Group Holdings Berhad's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 236% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to fall by 17.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 54%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.0292 in 2013 to the most recent total annual payment of MYR0.06. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
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. Pantech Group Holdings Berhad has impressed us by growing EPS at 17% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Pantech Group Holdings Berhad's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pantech Group Holdings Berhad's payments, as there could be some issues with sustaining them into the future. While Pantech Group Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Pantech Group Holdings Berhad has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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