Alliance Bank Malaysia Berhad's (KLSE:ABMB) Dividend Is Being Reduced To MYR0.0937

The board of Alliance Bank Malaysia Berhad (KLSE:ABMB) has announced that the dividend on 30th of December will be reduced by 1.4% from last year's MYR0.095 to MYR0.0937. Despite the cut, the dividend yield of 4.2% will still be comparable to other companies in the industry.

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Alliance Bank Malaysia Berhad's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Alliance Bank Malaysia Berhad has a good history of paying out dividends, with its current track record at 8 years. Based on Alliance Bank Malaysia Berhad's last earnings report, the payout ratio is at a decent 39%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 7.6%. The future payout ratio could be 43% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

See our latest analysis for Alliance Bank Malaysia Berhad

Alliance Bank Malaysia Berhad's Dividend Has Lacked Consistency

Looking back, Alliance Bank Malaysia Berhad's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was MYR0.17, compared to the most recent full-year payment of MYR0.194. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Alliance Bank Malaysia Berhad has impressed us by growing EPS at 12% per year over the past five years. Alliance Bank Malaysia Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Alliance Bank Malaysia Berhad Looks Like A Great Dividend Stock

Overall, we think that Alliance Bank Malaysia Berhad could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Alliance Bank Malaysia Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.