Petron Malaysia Refining & Marketing Bhd's (KLSE:PETRONM) Dividend Is Being Reduced To MYR0.23

Petron Malaysia Refining & Marketing Bhd (KLSE:PETRONM) has announced that on 4th of July, it will be paying a dividend ofMYR0.23, which a reduction from last year's comparable dividend. This means that the annual payment is 4.5% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Petron Malaysia Refining & Marketing Bhd

Petron Malaysia Refining & Marketing Bhd's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Petron Malaysia Refining & Marketing Bhd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from MYR0.14 total annually to MYR0.23. This means that it has been growing its distributions at 5.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Petron Malaysia Refining & Marketing Bhd has the option to increase the payout ratio to return more cash to shareholders.

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. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Petron Malaysia Refining & Marketing Bhd that investors should know about before committing capital to this stock. Is Petron Malaysia Refining & Marketing Bhd not quite the opportunity you were looking for? Why not check out our selection of top 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.