Scicom (MSC) Berhad (KLSE:SCICOM) dividend will be RM0.02

Scicom (MSC) Berhad (KLSE: SCICOM) investors are due to receive a payment of RM0.02 per share on March 29. This means that the annual payout is 4.9% of the current share price, which is above the industry average.

Check out our latest analysis for Scicom (MSC) Berhad

Scicom (MSC) Berhad payment has strong revenue coverage

Impressive dividend yields are good, but that doesn’t matter much if payouts can’t be sustained. The last payment was 77% of revenue, but cash flow was much higher. This leaves a lot of money to reinvest in the business.

Over the next year, EPS is expected to increase by 15.0%. Assuming the dividend continues on recent trends, we believe the payout ratio could be 67%, which would be comfortable enough to drive the dividend forward.

KLSE: SCICOM Historic dividend March 2, 2022

Dividend volatility

The company has a long history of dividends, but it doesn’t look good with the cuts of the past. Since 2012, the first annual payment was RM0.025, compared to the most recent annual payment of RM0.06. This equates to a compound annual growth rate (CAGR) of approximately 9.1% per year during this period. We’ve seen cuts in the past, so while growth looks promising, we’d be a bit cautious about its track record.

Dividend growth can be hard to come by

Earnings per share growth could be a mitigating factor given past dividend fluctuations. Over the past five years, it appears that Scicom (MSC) Berhad’s EPS has declined by around 9.6% per year. If the company earns less over time, it naturally follows that it will also have to pay fewer dividends. It’s not all bad news though, as earnings are expected to rise over the next 12 months – we’d just be a bit cautious until this can turn into a longer-term trend.

Our thoughts on the Scicom (MSC) Berhad dividend

Overall, we don’t think this company is generating a great dividend, even though the dividend hasn’t been cut this year. The company generates a lot of cash, which could sustain the dividend for a while, but the balance sheet isn’t great. We don’t think Scicom (MSC) Berhad is a great stock to add to your portfolio if income is your priority.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. For example, we chose 1 warning sign for Scicom (MSC) Berhad that investors should be aware of before committing capital to this security. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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