Shares of mining services business Maca Ltd (ASX: MLD) have leaped over 8% higher today, following the announcement of its half yearly results.
In the six months to 31 December 2014, Maca reported a profit of $34.7 million, up 6.4% on the prior corresponding period, and a huge interim dividend of seven cents per share, up 7.7%.
Revenue for the period came in at $319.7 million, up 4.4%, at a time when other mining services companies, such as UGL Limited (ASX: UGL), have been forced to take huge impairments or declare losses in the wake of falling mining investment.
Whilst Maca – currently boasting a capitalisation of around $250 million – hasn't been immune from the fallout, its $93.6 million in cash and an order book of $1.47 billion will no doubt provide some reassurance for shareholders.
Looking ahead, Maca said it is well placed to win future contracts and expects operating cash flow to be stronger in the second half of the year with the collection of receivables from projects ceasing.
Maca has confirmed its full year revenue guidance of $620 million and said its profit after tax will exceed the $55.4 million it achieved in financial year 2014.
Today the company also announced that non-executive director and founding shareholder, Ross Williams, would be retiring from his position, with immediate effect.
Is Maca's huge dividend too good to pass up?
Based on the current market price for Maca shares of around $1.04, the interim dividend alone puts it on a yield of 6.7% fully franked. What's more, management said they anticipate, "a very strong positive working capital movement in the coming period, which would provide flexibility to increase the dividend payout ratio going forward."
Hypothetically if Maca's management do not increase the final dividend but simply declare another seven cents per share fully franked distribution, it would mean its shares are currently trading on a yield of around 13.4%, or over 19% grossed-up!
However, despite what appears to be an excellent opportunity to buy an extremely high yielding stock, personally, I'd be very cautious about hitting the buy button on Maca shares today. Whilst its cash balance, coupled with its push into South America look great, there's a lot of uncertainty facing the industry and that means its future may not be that bright.
