Bermaz Auto Berhad's (KLSE:BAUTO) Shareholders Will Receive A Bigger Dividend Than Last Year

Bermaz Auto Berhad's (KLSE:BAUTO) dividend will be increasing to RM0.022 on 5th of May. This will take the dividend yield from 3.4% to 4.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Bermaz Auto Berhad

Bermaz Auto Berhad's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Bermaz Auto Berhad was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 16.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

Bermaz Auto Berhad's Dividend Has Lacked Consistency

It's comforting to see that Bermaz Auto Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 8 years was RM0.025 in 2014, and the most recent fiscal year payment was RM0.06. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Bermaz Auto Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bermaz Auto Berhad hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Bermaz Auto Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bermaz Auto Berhad's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. 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.