Stock Analysis

CIMB Group Holdings Berhad (KLSE:CIMB) Will Pay A Larger Dividend Than Last Year At MYR0.13

KLSE:CIMB
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CIMB Group Holdings Berhad (KLSE:CIMB) will increase its dividend on the 12th of April to MYR0.13, which is 3.6% higher than last year's payment from the same period of MYR0.126. This makes the dividend yield about the same as the industry average at 4.7%.

See our latest analysis for CIMB Group Holdings Berhad

CIMB Group Holdings Berhad's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

CIMB Group Holdings Berhad has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on CIMB Group Holdings Berhad's last earnings report, the payout ratio is at a decent 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 38.9% over the next 3 years. Analysts forecast the future payout ratio could be 52% over the same time horizon, which is a number we think the company can maintain.

historic-dividend
KLSE:CIMB Historic Dividend March 3rd 2023

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from MYR0.22 total annually to MYR0.26. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. 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.

CIMB Group 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. Unfortunately, CIMB Group Holdings Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for CIMB Group Holdings Berhad that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether CIMB Group Holdings Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.