Carlsberg Brewery Malaysia Berhad's (KLSE:CARLSBG) Shareholders Will Receive A Smaller Dividend Than Last Year

Carlsberg Brewery Malaysia Berhad's (KLSE:CARLSBG) dividend is being reduced from last year's payment covering the same period to MYR0.25 on the 18th of May. However, the dividend yield of 4.0% still remains in a typical range for the industry.

See our latest analysis for Carlsberg Brewery Malaysia Berhad

Carlsberg Brewery Malaysia Berhad's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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 101% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 22.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from MYR0.725 total annually to MYR0.88. This means that it has been growing its distributions at 2.0% 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.

We Could See Carlsberg Brewery Malaysia Berhad's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Carlsberg Brewery Malaysia Berhad has impressed us by growing EPS at 7.5% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Carlsberg Brewery Malaysia Berhad (of which 1 doesn't sit too well with us!) you should know about. 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.