Heineken Malaysia Berhad (KLSE:HEIM) Has Announced A Dividend Of MYR0.40

Heineken Malaysia Berhad's (KLSE:HEIM) investors are due to receive a payment of MYR0.40 per share on 10th of November. This means the annual payment is 5.2% 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 Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 12.3%. 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. Since 2013, the annual payment back then was MYR0.65, compared to the most recent full-year payment of MYR1.38. This means that it has been growing its distributions at 7.8% per annum 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.

Heineken Malaysia Berhad May Have Challenges Growing 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. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

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. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Heineken Malaysia Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Heineken Malaysia Berhad that investors need to be conscious of moving forward. 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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