Heineken Malaysia Berhad (KLSE:HEIM) Will Pay A Larger Dividend Than Last Year At 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 will take the dividend yield to an attractive 6.1%, providing a nice boost to shareholder returns.

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Heineken Malaysia Berhad's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

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.

See our latest analysis for Heineken Malaysia Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.645 in 2015 to the most recent total annual payment of MYR1.55. This implies that the company grew its distributions at a yearly rate of about 9.2% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Heineken Malaysia Berhad has impressed us by growing EPS at 8.3% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Heineken Malaysia Berhad's payments are rock solid. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Heineken Malaysia Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.