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

Bermaz Auto Berhad's (KLSE:BAUTO) periodic dividend will be increasing on the 5th of May to MYR0.045, with investors receiving 100% more than last year's MYR0.0225. This will take the dividend yield to an attractive 6.2%, providing a nice boost to shareholder returns.

Check out 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. Before making this announcement, Bermaz Auto Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 0.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

Bermaz Auto Berhad's Dividend Has Lacked Consistency

Looking back, Bermaz Auto Berhad's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was MYR0.025 in 2014, and the most recent fiscal year payment was MYR0.133. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bermaz Auto Berhad has seen EPS rising for the last five years, at 22% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Bermaz Auto Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bermaz Auto Berhad is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Bermaz Auto Berhad that you should be aware of before investing. Is Bermaz Auto Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.