Bermaz Auto Berhad (KLSE:BAUTO) Is Increasing Its Dividend To MYR0.03

Bermaz Auto Berhad's (KLSE:BAUTO) dividend will be increasing from last year's payment of the same period to MYR0.03 on 4th of November. This makes the dividend yield 5.9%, which is above the industry average.

See our latest analysis for Bermaz Auto Berhad

Bermaz Auto Berhad's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Bermaz Auto Berhad's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 48.9% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Bermaz Auto Berhad's Dividend Has Lacked Consistency

Looking back, Bermaz Auto Berhad's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from MYR0.025 total annually to MYR0.113. This means that it has been growing its distributions at 18% per annum over that time. Bermaz Auto Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Bermaz Auto Berhad has grown earnings per share at 15% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Bermaz Auto Berhad Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Bermaz Auto Berhad that investors need to be conscious of moving forward. Is Bermaz Auto Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.