FM Global Logistics Holdings Berhad's (KLSE:FM) Shareholders Will Receive A Bigger Dividend Than Last Year

FM Global Logistics Holdings Berhad (KLSE:FM) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of October to MYR0.02. Despite this raise, the dividend yield of 6.9% is only a modest boost to shareholder returns.

View our latest analysis for FM Global Logistics Holdings Berhad

FM Global Logistics Holdings Berhad's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. But before making this announcement, FM Global Logistics Holdings Berhad's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

The next year is set to see EPS grow by 10.8%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

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 2012, the annual payment back then was MYR0.0125, compared to the most recent full-year payment of MYR0.04. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. FM Global Logistics Holdings Berhad has seen EPS rising for the last five years, at 16% per annum. FM Global Logistics Holdings Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments FM Global Logistics Holdings Berhad has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for FM Global Logistics Holdings Berhad that investors need to be conscious of moving forward. Is FM Global Logistics Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.