Public Bank Berhad's (KLSE:PBBANK) Shareholders Will Receive A Bigger Dividend Than Last Year

Public Bank Berhad (KLSE:PBBANK) will increase its dividend from last year's comparable payment on the 23rd of September to MYR0.08. Despite this raise, the dividend yield of 3.4% is only a modest boost to shareholder returns.

See our latest analysis for Public Bank Berhad

Public Bank Berhad's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Public Bank Berhad has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Public Bank Berhad's last earnings report, the payout ratio is at a decent 55%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 32.4%. The future payout ratio could be 52% 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. The annual payment during the last 10 years was MYR0.096 in 2012, and the most recent fiscal year payment was MYR0.16. This means that it has been growing its distributions at 5.2% 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. Public Bank Berhad might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Public Bank Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Public Bank Berhad is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Public Bank Berhad that investors should take into consideration. Is Public Bank 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.