Mah Sing Group Berhad's (KLSE:MAHSING) Dividend Will Be Increased To MYR0.03

The board of Mah Sing Group Berhad (KLSE:MAHSING) has announced that it will be increasing its dividend by 13% on the 21st of September to MYR0.03, up from last year's comparable payment of MYR0.0265. The payment will take the dividend yield to 4.9%, which is in line with the average for the industry.

View our latest analysis for Mah Sing Group Berhad

Mah Sing Group Berhad's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Mah Sing Group Berhad's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 35.1% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.0507 total annually to MYR0.03. Doing the maths, this is a decline of about 5.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Mah Sing Group Berhad's EPS has declined at around 9.9% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Mah Sing Group Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Mah Sing Group Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Mah Sing Group Berhad that investors need to be conscious of moving forward. Is Mah Sing Group Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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