Aztech Global surprises with a high dividend yield of 9.9%

Aztech Global will distribute a dividend of SGD0.05 on August 16, resulting in a notable dividend yield of 9.9%, which is above the industry average. It is encouraging to see that this dividend accounts for only 62% of the free cash flow, leaving ample room for reinvestment in the company. The sustainable payout is therefore in focus to ensure a stable income source for investors in the long term. For the coming year, an increase in earnings per share by 20.5% is forecasted. If the dividend policy remains stable, the payout ratio could rise to 72%, which is considered robust. Although the dividend history is still relatively short, the annual increase in payouts from SGD0.02 in 2021 to SGD0.10 this year demonstrates an impressive growth rate of approximately 71% per year. However, there have also been cuts in the past, which warrants some caution. Given that the dividend has previously been reduced, it is crucial to analyze earnings growth. Aztech Global has recorded an annual growth in earnings per share of 12% over the past five years. The growth rates to date are solid, but a higher payout ratio could limit future growth opportunities unless the company can grow without additional capital investments or marketing expenses. Overall, Aztech Global could represent an attractive income stock, particularly due to the higher dividend announced this year. Earnings comfortably cover the payouts, and the company generates sufficient cash. This meets many of the criteria we consider when selecting an income stock. It is worth noting that companies with a consistent dividend policy tend to gain more trust from investors than those with irregular payouts. At the same time, dividends are only one of many factors that should be considered when evaluating a company.