Panasonic Manufacturing Malaysia Berhad's (KLSE:PANAMY) Dividend Is Being Reduced To RM1.48

Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) has announced it will be reducing its dividend payable on the 23rd of September to RM1.48. Despite the cut, the dividend yield of 5.1% will still be comparable to other companies in the industry.

Check out our latest analysis for Panasonic Manufacturing Malaysia Berhad

Panasonic Manufacturing Malaysia Berhad Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Panasonic Manufacturing Malaysia Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 103% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to fall by 13.6%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 98%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from RM1.20 to RM1.63. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Panasonic Manufacturing Malaysia Berhad has seen earnings per share falling at 2.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Panasonic Manufacturing Malaysia Berhad is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Panasonic Manufacturing Malaysia Berhad that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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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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