PETRONAS Chemicals Group Berhad (KLSE:PCHEM) Is Paying Out Less In Dividends Than Last Year

PETRONAS Chemicals Group Berhad's (KLSE:PCHEM) dividend is being reduced from last year's payment covering the same period to MYR0.03 on the 20th of March. However, the dividend yield of 3.5% still remains in a typical range for the industry.

View our latest analysis for PETRONAS Chemicals Group Berhad

PETRONAS Chemicals Group Berhad's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 89% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 65.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 55% which would be quite comfortable going to take the dividend forward.

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 MYR0.20 in 2015 to the most recent total annual payment of MYR0.13. The dividend has shrunk at around 4.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. PETRONAS Chemicals Group Berhad's earnings per share has shrunk at 16% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On PETRONAS Chemicals Group Berhad's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think PETRONAS Chemicals Group Berhad is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for PETRONAS Chemicals Group Berhad that investors need to be conscious of moving forward. Is PETRONAS Chemicals Group 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.