Axiata Group Berhad's (KLSE:AXIATA) Dividend Will Be Increased To RM0.055

Axiata Group Berhad (KLSE:AXIATA) will increase its dividend on the 28th of March to RM0.055. Even though the dividend went up, the yield is still quite low at only 2.5%.

See our latest analysis for Axiata Group Berhad

Axiata Group Berhad's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Axiata Group Berhad's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 63.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 54% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from RM0.10 to RM0.095. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Axiata Group Berhad has seen EPS rising for the last five years, at 9.5% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Our Thoughts On Axiata Group Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Axiata Group Berhad will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Axiata Group Berhad has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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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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.