Stock Analysis

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

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7-Eleven Malaysia Holdings Berhad (KLSE:SEM) is reducing its dividend to MYR0.027 on the 28th of Maywhich is 50% less than last year's comparable payment of MYR0.054. However, the dividend yield of 2.7% is still a decent boost to shareholder returns.

Check out our latest analysis for 7-Eleven Malaysia Holdings Berhad

7-Eleven Malaysia Holdings 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. The last payment made up 81% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 40%, which is in a comfortable range for us.

KLSE:SEM Historic Dividend April 21st 2024

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was MYR0.025 in 2015, and the most recent fiscal year payment was MYR0.054. This implies that the company grew its distributions at a yearly rate of about 8.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. However, 7-Eleven Malaysia Holdings Berhad's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for 7-Eleven Malaysia Holdings Berhad that you should be aware of before investing. 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.