Manulife Holdings Berhad (KLSE:MANULFE) Is Paying Out A Dividend Of MYR0.07

The board of Manulife Holdings Berhad (KLSE:MANULFE) has announced that it will pay a dividend on the 9th of August, with investors receiving MYR0.07 per share. Including this payment, the dividend yield on the stock will be 3.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Manulife Holdings Berhad

Manulife Holdings Berhad's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Manulife Holdings Berhad was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 2.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 MYR0.15, compared to the most recent full-year payment of MYR0.07. The dividend has shrunk at around 7.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Earnings per share has been crawling upwards at 2.6% per year. Growth of 2.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Manulife Holdings Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Manulife Holdings Berhad's payments, as there could be some issues with sustaining them into the future. While Manulife Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think Manulife Holdings Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 4 warning signs for Manulife Holdings Berhad that you should be aware of before investing. Is Manulife Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.