Astro Malaysia Holdings Berhad (KLSE:ASTRO) Has Affirmed Its Dividend Of RM0.015

The board of Astro Malaysia Holdings Berhad (KLSE:ASTRO) has announced that it will pay a dividend of RM0.015 per share on the 7th of January. Based on this payment, the dividend yield on the company's stock will be 8.8%, which is an attractive boost to shareholder returns.

See our latest analysis for Astro Malaysia Holdings Berhad

Astro Malaysia Holdings Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Astro Malaysia Holdings Berhad was paying out 88% of earnings, but a comparatively small 55% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 4.5%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 77% which is a bit high but can definitely be sustainable.

Astro Malaysia Holdings Berhad's Dividend Has Lacked Consistency

Looking back, Astro Malaysia Holdings Berhad's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2012, the first annual payment was RM0.03, compared to the most recent full-year payment of RM0.08. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Astro Malaysia Holdings Berhad's earnings per share has shrunk at approximately 6.0% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 can turn into a longer term trend.

Our Thoughts On Astro Malaysia Holdings Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Astro Malaysia Holdings Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.