Magni-Tech Industries Berhad (KLSE:MAGNI) Will Pay A Larger Dividend Than Last Year At MYR0.035

Magni-Tech Industries Berhad's (KLSE:MAGNI) dividend will be increasing from last year's payment of the same period to MYR0.035 on 18th of April. Although the dividend is now higher, the yield is only 4.0%, which is below the industry average.

Check out our latest analysis for Magni-Tech Industries Berhad

Magni-Tech Industries 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. Based on the last payment, Magni-Tech Industries Berhad was paying only paying out a fraction of earnings, but the payment was a massive 226% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS could expand by 3.5% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 MYR0.0275, compared to the most recent full-year payment of MYR0.09. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Magni-Tech Industries Berhad 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.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 3.5% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Magni-Tech Industries Berhad could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Magni-Tech Industries Berhad (2 are potentially serious!) that you should be aware of before investing. Is Magni-Tech Industries Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.