7-Eleven Malaysia Holdings Berhad's (KLSE:SEM) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) has announced that it will be increasing its dividend by 108% on the 25th of May to MYR0.054, up from last year's comparable payment of MYR0.026. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

See our latest analysis for 7-Eleven Malaysia Holdings Berhad

7-Eleven Malaysia Holdings Berhad's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, 7-Eleven Malaysia Holdings Berhad's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 52.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

7-Eleven Malaysia Holdings Berhad's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was MYR0.025, compared to the most recent full-year payment of MYR0.026. Dividend payments have grown at less than 1% a year over this period. 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.

7-Eleven Malaysia Holdings Berhad Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. 7-Eleven Malaysia Holdings Berhad has seen EPS rising for the last five years, at 6.5% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On 7-Eleven Malaysia Holdings Berhad's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 1 warning sign for 7-Eleven Malaysia Holdings Berhad that investors need to be conscious of moving forward. 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.