FM Global Logistics Holdings Berhad (KLSE:FM) Is Paying Out A Larger Dividend Than Last Year

FM Global Logistics Holdings Berhad's (KLSE:FM) dividend will be increasing from last year's payment of the same period to MYR0.02 on 7th of October. Despite this raise, the dividend yield of 6.7% is only a modest boost to shareholder returns.

View our latest analysis for FM Global Logistics Holdings Berhad

FM Global Logistics Holdings Berhad's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. FM Global Logistics Holdings Berhad was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 10.8% over the next year. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.0125 in 2012 to the most recent total annual payment of MYR0.04. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. FM Global Logistics Holdings Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. FM Global Logistics Holdings Berhad has seen EPS rising for the last five years, at 16% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On FM Global Logistics Holdings Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think FM Global Logistics Holdings Berhad's payments are rock solid. While FM Global Logistics Holdings Berhad is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for FM Global Logistics Holdings Berhad that investors should know about before committing capital to this stock. 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.