Axiata Group Berhad (KLSE:AXIATA) Will Pay A Dividend Of MYR0.05

Axiata Group Berhad (KLSE:AXIATA) will pay a dividend of MYR0.05 on the 16th of April. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Axiata Group Berhad

Axiata Group Berhad Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Even though Axiata Group Berhad is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 478%, which is on the unsustainable side.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from MYR0.23 total annually to MYR0.10. This works out to be a decline of approximately 8.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Axiata Group Berhad's earnings per share has shrunk at 25% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Axiata Group Berhad's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Axiata Group Berhad that investors should know about before committing capital to this stock. Is Axiata Group Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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