Gas Malaysia Berhad (KLSE:GASMSIA) Has Announced That It Will Be Increasing Its Dividend To RM0.069

Gas Malaysia Berhad (KLSE:GASMSIA) will increase its dividend on the 27th of July to RM0.069. This will take the dividend yield from 6.4% to 6.4%, providing a nice boost to shareholder returns.

See our latest analysis for Gas Malaysia Berhad

Gas Malaysia Berhad Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Gas Malaysia Berhad was paying out 91% of earnings, but a comparatively small 55% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to fall by 3.2%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 102%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was RM0.10, compared to the most recent full-year payment of RM0.18. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Gas Malaysia Berhad might have put its house in order since then, but we remain cautious.

We Could See Gas Malaysia Berhad's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Gas Malaysia Berhad has seen EPS rising for the last five years, at 8.6% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 don't think Gas Malaysia Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Gas Malaysia Berhad that investors should take into consideration. 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.