Malayan Banking Berhad (KLSE:MAYBANK) Has Affirmed Its Dividend Of MYR0.28

Malayan Banking Berhad (KLSE:MAYBANK) will pay a dividend of MYR0.28 on the 19th of October. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Malayan Banking Berhad

Malayan Banking Berhad's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having distributed dividends for at least 10 years, Malayan Banking Berhad has a long history of paying out a part of its earnings to shareholders. Based on Malayan Banking Berhad's last earnings report, the payout ratio is at a decent 90%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to grow by 36.5% over the next 3 years. Likewise, analysts forecast that the future payout ratio could reach 76% over that same time period. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from MYR0.72 total annually to MYR0.58. Doing the maths, this is a decline of about 2.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Malayan Banking 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. It's not great to see that Malayan Banking Berhad's earnings per share has fallen at approximately 2.7% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Malayan Banking Berhad you should be aware of, and 1 of them is a bit concerning. Is Malayan Banking Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.