Malayan Banking Berhad (KLSE:MAYBANK) Has Announced That It Will Be Increasing Its Dividend To MYR0.32

Malayan Banking Berhad's (KLSE:MAYBANK) dividend will be increasing from last year's payment of the same period to MYR0.32 on 26th of March. The payment will take the dividend yield to 5.8%, which is in line with the average for the industry.

Check out our latest analysis for Malayan Banking Berhad

Malayan Banking Berhad's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Malayan Banking Berhad has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Malayan Banking Berhad's payout ratio of 73% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 15.2%. The future payout ratio could be 73% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from MYR0.535 total annually to MYR0.61. This means that it has been growing its distributions at 1.3% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

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, Malayan Banking Berhad has only grown its earnings per share at 2.6% per annum over the past five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Malayan Banking Berhad that investors should take into consideration. 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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