Genting Plantations Berhad's (KLSE:GENP) Upcoming Dividend Will Be Larger Than Last Year's

Genting Plantations Berhad (KLSE:GENP) has announced that it will be increasing its periodic dividend on the 26th of September to MYR0.15, which will be 36% higher than last year's comparable payment amount of MYR0.11. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Genting Plantations Berhad

Genting Plantations Berhad Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Genting Plantations Berhad was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 42.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 97%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from MYR0.163 total annually to MYR0.30. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

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. However, Genting Plantations Berhad has only grown its earnings per share at 4.7% per annum over the past five years. While EPS growth is quite low, Genting Plantations Berhad has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Genting Plantations Berhad (of which 1 can't be ignored!) you should know about. Is Genting Plantations 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.