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

The board of Gas Malaysia Berhad (KLSE:GASMSIA) has announced that it will be paying its dividend of MYR0.0824 on the 31st of March, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.8%.

View 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 74% of earnings, but a comparatively small 35% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to fall by 10.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 83%, which is definitely on the higher side.

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. The dividend has gone from an annual total of MYR0.10 in 2013 to the most recent total annual payment of MYR0.128. This means that it has been growing its distributions at 2.5% per annum over that time. 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.

The Dividend Looks Likely To Grow

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 that Gas Malaysia Berhad has been growing its earnings per share at 19% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Gas Malaysia Berhad you should be aware of, and 1 of them is a bit unpleasant. 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.