Panasonic Manufacturing Malaysia Berhad's (KLSE:PANAMY) Upcoming Dividend Will Be Larger Than Last Year's

Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of September to MYR1.21. This will take the dividend yield to an attractive 6.8%, providing a nice boost to shareholder returns.

See our latest analysis for Panasonic Manufacturing Malaysia Berhad

Panasonic Manufacturing Malaysia Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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 113% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 7.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was MYR1.88, compared to the most recent full-year payment of MYR1.36. The dividend has shrunk at around 3.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Panasonic Manufacturing Malaysia Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Panasonic Manufacturing Malaysia Berhad's earnings per share has shrunk at approximately 3.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Panasonic Manufacturing Malaysia Berhad that investors should know about before committing capital to this stock. 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.