Ajinomoto (Malaysia) Berhad (KLSE:AJI) Will Pay A Dividend Of MYR0.384

The board of Ajinomoto (Malaysia) Berhad (KLSE:AJI) has announced that it will pay a dividend of MYR0.384 per share on the 25th of September. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

Check out our latest analysis for Ajinomoto (Malaysia) Berhad

Ajinomoto (Malaysia) Berhad's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Ajinomoto (Malaysia) Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 48.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was MYR0.20 in 2014, and the most recent fiscal year payment was MYR0.384. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ajinomoto (Malaysia) Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Ajinomoto (Malaysia) Berhad has been growing its earnings per share at 48% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Ajinomoto (Malaysia) Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Ajinomoto (Malaysia) Berhad is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Ajinomoto (Malaysia) Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.

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