Heineken Malaysia Berhad (KLSE:HEIM) Has Affirmed Its Dividend Of MYR0.40

The board of Heineken Malaysia Berhad (KLSE:HEIM) has announced that it will pay a dividend of MYR0.40 per share on the 10th of November. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Heineken Malaysia Berhad

Heineken Malaysia Berhad's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to grow by 11.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 94%, which is on the higher side, but certainly still feasible.

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 MYR0.75 in 2013, and the most recent fiscal year payment was MYR1.38. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. 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.

There Isn't Much Room To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Heineken Malaysia Berhad has been growing its earnings per share at 9.5% a year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Heineken Malaysia Berhad's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Heineken Malaysia Berhad has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Heineken Malaysia Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Heineken Malaysia Berhad that investors should take into consideration. 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.