Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) Has Affirmed Its Dividend Of RM0.05

The board of Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) has announced that it will pay a dividend on the 24th of June, with investors receiving RM0.05 per share. The dividend yield will be 4.7% based on this payment which is still above the industry average.

Check out our latest analysis for Amway (Malaysia) Holdings Berhad

Amway (Malaysia) Holdings Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Amway (Malaysia) Holdings Berhad's dividend made up quite a large proportion of earnings but only 28% 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.

The next year is set to see EPS grow by 46.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend 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. Since 2012, the first annual payment was RM0.66, compared to the most recent full-year payment of RM0.24. Doing the maths, this is a decline of about 9.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

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. Over the past five years, it looks as though Amway (Malaysia) Holdings Berhad's EPS has declined at around 4.4% a year. 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. 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Amway (Malaysia) Holdings Berhad that investors need to be conscious of moving forward. Is Amway (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.