Heineken Malaysia Berhad (KLSE:HEIM) Is Increasing Its Dividend To MYR0.98

Heineken Malaysia Berhad (KLSE:HEIM) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of July to MYR0.98. This makes the dividend yield 4.8%, which is above the industry average.

View our latest analysis for Heineken Malaysia Berhad

Heineken Malaysia Berhad's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 101% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 15.3% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

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 MYR0.65 in 2013, and the most recent fiscal year payment was MYR1.38. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

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 8.9% 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 always like to see the dividend being raised, but we don't think Heineken Malaysia Berhad will make a great income stock. 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Heineken Malaysia Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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