Astro Malaysia Holdings Berhad (KLSE:ASTRO) Will Pay A Smaller Dividend Than Last Year

Astro Malaysia Holdings Berhad's (KLSE:ASTRO) dividend is being reduced from last year's payment covering the same period to MYR0.0075 on the 13th of January. However, the dividend yield of 9.9% is still a decent boost to shareholder returns.

Check out our latest analysis for Astro Malaysia Holdings Berhad

Astro Malaysia Holdings Berhad's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Astro Malaysia Holdings Berhad's dividend made up quite a large proportion of earnings but only 52% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 23.4% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 59% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was MYR0.03, compared to the most recent full-year payment of MYR0.0675. This implies that the company grew its distributions at a yearly rate of about 8.4% 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 Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Astro Malaysia Holdings Berhad's earnings per share has shrunk at 15% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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 Astro Malaysia Holdings Berhad's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Astro Malaysia Holdings Berhad that investors need to be conscious of moving forward. Is Astro Malaysia 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.