Carlsberg Brewery Malaysia Berhad's (KLSE:CARLSBG) Dividend Will Be Increased To MYR0.23

The board of Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) has announced that it will be paying its dividend of MYR0.23 on the 7th of January, an increased payment from last year's comparable dividend. This makes the dividend yield 4.6%, which is above the industry average.

See our latest analysis for Carlsberg Brewery Malaysia Berhad

Carlsberg Brewery Malaysia Berhad's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Carlsberg Brewery Malaysia Berhad was paying out a very large proportion of what it was earning and 95% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share is forecast to rise by 20.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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 MYR0.63 in 2014, and the most recent fiscal year payment was MYR0.93. This means that it has been growing its distributions at 4.0% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Carlsberg Brewery Malaysia Berhad May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.0% per year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Carlsberg Brewery Malaysia Berhad is a great stock to add to your portfolio if income is your focus.

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 picked out 1 warning sign for Carlsberg Brewery Malaysia Berhad that investors should know about before committing capital to this stock. Is Carlsberg Brewery 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.