Malaysian Pacific Industries Berhad (KLSE:MPI) Will Pay A Dividend Of MYR0.10

Malaysian Pacific Industries Berhad (KLSE:MPI) has announced that it will pay a dividend of MYR0.10 per share on the 21st of December. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

Our analysis indicates that MPI is potentially undervalued!

Malaysian Pacific Industries Berhad's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Malaysian Pacific Industries Berhad was paying only paying out a fraction of earnings, but the payment was a massive 214% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 23.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

Malaysian Pacific Industries Berhad Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was MYR0.10, compared to the most recent full-year payment of MYR0.35. This means that it has been growing its distributions at 13% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Malaysian Pacific Industries Berhad has grown earnings per share at 10% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Malaysian Pacific Industries Berhad's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Malaysian Pacific Industries Berhad's payments, as there could be some issues with sustaining them into the future. While Malaysian Pacific Industries Berhad is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Malaysian Pacific Industries Berhad for free with public analyst estimates for the company. 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.