Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) Is Increasing Its Dividend To MYR0.25

Carlsberg Brewery Malaysia Berhad's (KLSE:CARLSBG) dividend will be increasing from last year's payment of the same period to MYR0.25 on 12th of January. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.

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Carlsberg Brewery Malaysia Berhad's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

EPS is set to grow by 12.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

See our latest analysis for Carlsberg Brewery Malaysia Berhad

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 dividend has gone from an annual total of MYR0.61 in 2015 to the most recent total annual payment of MYR1.00. 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.

Carlsberg Brewery Malaysia Berhad Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Carlsberg Brewery Malaysia Berhad has been growing its earnings per share at 13% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Carlsberg Brewery Malaysia Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Carlsberg Brewery Malaysia Berhad's payments are rock solid. Strong earnings growth means Carlsberg Brewery Malaysia Berhad has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 1 warning sign for Carlsberg Brewery Malaysia Berhad that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.