Gas Malaysia Berhad's (KLSE:GASMSIA) Upcoming Dividend Will Be Larger Than Last Year's

Gas Malaysia Berhad (KLSE:GASMSIA) has announced that it will be increasing its dividend on the 28th of October to RM0.048, which will be 13% higher than last year. This makes the dividend yield 5.8%, which is above the industry average.

View our latest analysis for Gas Malaysia Berhad

Gas Malaysia Berhad's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 81% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 5.8% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 94% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Gas Malaysia Berhad's Dividend Has Lacked Consistency

It's comforting to see that Gas Malaysia Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from RM0.10 in 2012 to the most recent annual payment of RM0.15. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Gas Malaysia Berhad's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Gas Malaysia Berhad has been growing its earnings per share at 16% a year over the past five years. 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.

Our Thoughts On Gas Malaysia Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Gas Malaysia Berhad's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Gas Malaysia Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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