Gas Malaysia Berhad's (KLSE:GASMSIA) Shareholders Will Receive A Smaller Dividend Than Last Year

Gas Malaysia Berhad (KLSE:GASMSIA) has announced that on 27th of October, it will be paying a dividend ofMYR0.0572, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 4.7%.

See our latest analysis for Gas Malaysia Berhad

Gas Malaysia Berhad's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Gas Malaysia Berhad was paying out 76% of earnings, but a comparatively small 33% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to fall by 11.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 89%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was MYR0.10, compared to the most recent full-year payment of MYR0.143. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Gas Malaysia Berhad Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Gas Malaysia Berhad has grown earnings per share at 16% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Gas Malaysia Berhad's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Gas Malaysia Berhad has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.