Malayan Banking Berhad's (KLSE:MAYBANK) Upcoming Dividend Will Be Larger Than Last Year's

The board of Malayan Banking Berhad (KLSE:MAYBANK) has announced that it will be paying its dividend of MYR0.31 on the 26th of March, an increased payment from last year's comparable dividend. This takes the dividend yield to 6.4%, which shareholders will be pleased with.

View our latest analysis for Malayan Banking Berhad

Malayan Banking 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.

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. Taking data from its last earnings report, calculating for the company's payout ratio shows 77%, which means that Malayan Banking Berhad would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 17.8%. Analyst estimates also show the future payout ratio being 74% in the same 3 years which brings it into quite a comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MYR0.65 in 2014, and the most recent fiscal year payment was MYR0.62. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. 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.

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's EPS was effectively flat over the past five years, which could stop the company from paying more every year. 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.

Our Thoughts On Malayan Banking Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Malayan Banking Berhad's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Malayan Banking Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.