Amway (Malaysia) Holdings Berhad's (KLSE:AMWAY) Dividend Will Be 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 16th of December. The dividend yield will be 4.8% based on this payment which is still above the industry average.

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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 earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 54.8%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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. However, Amway (Malaysia) Holdings Berhad's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

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. While Amway (Malaysia) Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Amway (Malaysia) Holdings Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.