Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) Is Increasing Its Dividend To MYR1.21

Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) will increase its dividend from last year's comparable payment on the 20th of September to MYR1.21. This will take the annual payment to 6.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Panasonic Manufacturing Malaysia Berhad

Panasonic Manufacturing Malaysia Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Panasonic Manufacturing Malaysia Berhad's was paying out quite a large proportion of earnings and 85% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Earnings per share is forecast to rise by 16.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 81%, which is on the higher side, but certainly still feasible.

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 dividend has gone from MYR1.88 total annually to MYR1.36. Doing the maths, this is a decline of about 3.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Panasonic Manufacturing Malaysia Berhad's earnings per share has shrunk at approximately 2.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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. 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.

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