Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) Is Paying Out A Dividend Of MYR0.05

Amway (Malaysia) Holdings Berhad (KLSE:AMWAY) will pay a dividend of MYR0.05 on the 23rd of September. This makes the dividend yield 4.8%, which will augment investor returns quite nicely.

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

Amway (Malaysia) Holdings Berhad's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Amway (Malaysia) Holdings Berhad was paying out 75% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS is forecast to expand by 73.2%. If the dividend continues on this path, the payout ratio could be 48% 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. Since 2012, the annual payment back then was MYR0.66, compared to the most recent full-year payment of MYR0.24. This works out to be a decline of approximately 9.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Amway (Malaysia) Holdings Berhad's earnings per share has shrunk at approximately 4.3% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Amway (Malaysia) Holdings Berhad has been making. We would probably look elsewhere for an income investment.

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 Amway (Malaysia) Holdings Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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