Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) Has Announced That It Will Be Increasing Its Dividend To MYR1.21

The board of Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) has announced that the dividend on 20th of September will be increased to MYR1.21, which will be 13% higher than last year's payment of MYR1.07 which covered the same period. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Panasonic Manufacturing Malaysia Berhad

Panasonic Manufacturing Malaysia Berhad's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Panasonic Manufacturing Malaysia Berhad's was paying out quite a large proportion of earnings and 88% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 42.8%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75% - 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 2014, the annual payment back then was MYR1.88, compared to the most recent full-year payment of MYR1.22. This works out to be a decline of approximately 4.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Panasonic Manufacturing Malaysia Berhad's earnings per share has shrunk at approximately 5.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Panasonic Manufacturing Malaysia Berhad's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Panasonic Manufacturing Malaysia Berhad's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Panasonic Manufacturing Malaysia Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Panasonic Manufacturing Malaysia Berhad that you should be aware of before investing. 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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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.