Gas Malaysia Berhad (KLSE:GASMSIA) Is Increasing Its Dividend To RM0.06

Gas Malaysia Berhad (KLSE:GASMSIA) will increase its dividend on the 31st of March to RM0.06. This will take the dividend yield from 3.8% to 6.0%, providing a nice boost to shareholder returns.

See our latest analysis for Gas Malaysia Berhad

Gas Malaysia Berhad's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Gas Malaysia Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 3.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 90%, which is definitely on the higher side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from RM0.10 in 2012 to the most recent annual payment of RM0.10. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. With a decent amount of growth and a low payout ratio, we think this bodes well for Gas Malaysia Berhad's prospects of growing its dividend payments in the future.

Gas Malaysia Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Gas Malaysia Berhad is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Gas Malaysia Berhad that investors need to be conscious of moving forward. Is Gas Malaysia 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.