MBM Resources Berhad's (KLSE:MBMR) Upcoming Dividend Will Be Larger Than Last Year's

MBM Resources Berhad (KLSE:MBMR) has announced that it will be increasing its periodic dividend on the 21st of March to MYR0.21, which will be 40% higher than last year's comparable payment amount of MYR0.15. This takes the annual payment to 9.6% of the current stock price, which is about average for the industry.

Check out our latest analysis for MBM Resources Berhad

MBM Resources Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, MBM Resources Berhad was paying a whopping 424% as a dividend, but this only made up 17% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 10.5% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 83% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from MYR0.06 total annually to MYR0.37. This means that it has been growing its distributions at 20% per annum over that time. 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

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. MBM Resources Berhad has impressed us by growing EPS at 33% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On MBM Resources Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think MBM Resources Berhad will make a great income stock. While MBM Resources Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think MBM Resources Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for MBM Resources Berhad you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high yield 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.