Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) Has Affirmed Its Dividend Of MYR0.05

The board of Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) has announced that it will pay a dividend on the 23rd of June, with investors receiving MYR0.05 per share. This means the annual payment is 7.2% of the current stock price, which is above the average for the industry.

View 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. Based on the last payment, Amway (Malaysia) Holdings Berhad's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 7.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2013, the annual payment back then was MYR0.70, compared to the most recent full-year payment of MYR0.38. The dividend has shrunk at around 5.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Amway (Malaysia) Holdings Berhad has impressed us by growing EPS at 8.3% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Amway (Malaysia) Holdings Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Amway (Malaysia) Holdings Berhad's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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 Amway (Malaysia) Holdings Berhad that investors should know about before committing capital to this stock. 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.