Ajinomoto (Malaysia) Berhad (KLSE:AJI) Is Increasing Its Dividend To MYR0.4085

Ajinomoto (Malaysia) Berhad (KLSE:AJI) has announced that it will be increasing its periodic dividend on the 24th of September to MYR0.4085, which will be 6.4% higher than last year's comparable payment amount of MYR0.384. The payment will take the dividend yield to 3.0%, which is in line with the average for the industry.

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Ajinomoto (Malaysia) Berhad's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Ajinomoto (Malaysia) Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 3.7% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 51%, which is definitely feasible to continue.

Check out our latest analysis for Ajinomoto (Malaysia) Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.185 in 2015, and the most recent fiscal year payment was MYR0.384. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ajinomoto (Malaysia) Berhad has seen earnings per share falling at 3.7% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Ajinomoto (Malaysia) Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Ajinomoto (Malaysia) Berhad will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Ajinomoto (Malaysia) Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Ajinomoto (Malaysia) Berhad that investors should know about before committing capital to this stock. Is Ajinomoto (Malaysia) Berhad 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.