AMMB Holdings Berhad (KLSE:AMBANK) Is Increasing Its Dividend To MYR0.166

AMMB Holdings Berhad (KLSE:AMBANK) will increase its dividend from last year's comparable payment on the 11th of July to MYR0.166. Based on this payment, the dividend yield for the company will be 5.3%, which is fairly typical for the industry.

See our latest analysis for AMMB Holdings Berhad

AMMB Holdings Berhad's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, AMMB Holdings Berhad has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but AMMB Holdings Berhad's payout ratio of 41% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 10.4%. Analysts estimate the future payout ratio will be 43% over the same time period, 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 dividend has gone from MYR0.22 total annually to MYR0.226. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

AMMB Holdings Berhad May Find It Hard To Grow The Dividend

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. However, AMMB Holdings Berhad's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.9% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for AMMB Holdings Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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