CIMB Group Holdings Berhad's (KLSE:CIMB) Shareholders Will Receive A Smaller Dividend Than Last Year

CIMB Group Holdings Berhad (KLSE:CIMB) has announced it will be reducing its dividend payable on the 30th of September to MYR0.1975, which is 27% lower than what investors received last year for the same period. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

CIMB Group Holdings Berhad's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

CIMB Group Holdings Berhad has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 55%, which means that CIMB Group Holdings Berhad would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 14.9% over the next 3 years. Analysts forecast the future payout ratio could be 58% over the same time horizon, which is a number we think the company can maintain.

See our latest analysis for CIMB Group Holdings Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from MYR0.20 total annually to MYR0.47. This means that it has been growing its distributions at 8.9% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. CIMB Group Holdings Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. CIMB Group Holdings Berhad has seen EPS rising for the last five years, at 22% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like CIMB Group Holdings Berhad's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like CIMB Group Holdings Berhad does. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for CIMB Group Holdings Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.