Mah Sing Group Berhad's (KLSE:MAHSING) Upcoming Dividend Will Be Larger Than Last Year's

Mah Sing Group Berhad's (KLSE:MAHSING) dividend will be increasing to RM0.026 on 29th of September. This will take the annual payment from 3.9% to 3.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Mah Sing Group Berhad

Mah Sing Group Berhad's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Mah Sing Group Berhad's dividend was only 60% of earnings, however it was paying out 392% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 81.3%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

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. The dividend has gone from RM0.073 in 2012 to the most recent annual payment of RM0.026. Doing the maths, this is a decline of about 9.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Mah Sing Group Berhad's EPS has fallen by approximately 20% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Mah Sing Group Berhad's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Mah Sing Group Berhad's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Mah Sing Group 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Mah Sing Group Berhad that investors should know about before committing capital to this stock. 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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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.