Heineken Malaysia Berhad (KLSE:HEIM) Is Increasing Its Dividend To MYR1.15

The board of Heineken Malaysia Berhad (KLSE:HEIM) has announced that it will be paying its dividend of MYR1.15 on the 23rd of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

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Heineken Malaysia Berhad's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 100% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 9.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 98%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Heineken Malaysia Berhad

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 MYR0.645 in 2015, and the most recent fiscal year payment was MYR1.55. This means that it has been growing its distributions at 9.2% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Heineken Malaysia Berhad has impressed us by growing EPS at 8.3% per 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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign 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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