Petron Malaysia Refining & Marketing Bhd (KLSE:PETRONM) Will Pay A Smaller Dividend Than Last Year

Petron Malaysia Refining & Marketing Bhd (KLSE:PETRONM) is reducing its dividend from last year's comparable payment to MYR0.23 on the 4th of July. This payment takes the dividend yield to 4.7%, which only provides a modest boost to overall returns.

View our latest analysis for Petron Malaysia Refining & Marketing Bhd

Petron Malaysia Refining & Marketing Bhd's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Petron Malaysia Refining & Marketing Bhd's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 3.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

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 dividend has gone from MYR0.14 total annually to MYR0.23. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 3.9% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Petron Malaysia Refining & Marketing Bhd could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Petron Malaysia Refining & Marketing Bhd's Dividend

Overall, we think that Petron Malaysia Refining & Marketing Bhd could make a reasonable income stock, even though it did cut the dividend this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Petron Malaysia Refining & Marketing Bhd that investors should take into consideration. 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.