Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) Is Due To Pay A Dividend Of MYR0.05

The board of Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) has announced that it will pay a dividend of MYR0.05 per share on the 21st of June. This makes the dividend yield 8.1%, which will augment investor returns quite nicely.

View our latest analysis for Amway (Malaysia) Holdings Berhad

Amway (Malaysia) Holdings Berhad's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Amway (Malaysia) Holdings Berhad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 17.5% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 85% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was MYR0.625, compared to the most recent full-year payment of MYR0.60. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Amway (Malaysia) Holdings Berhad has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Amway (Malaysia) Holdings Berhad's prospects of growing its dividend payments in the future.

We Really Like Amway (Malaysia) Holdings Berhad's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 2 warning signs for Amway (Malaysia) Holdings Berhad you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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