PBA Holdings Bhd (KLSE:PBA) Has Announced That It Will Be Increasing Its Dividend To MYR0.015

PBA Holdings Bhd's (KLSE:PBA) periodic dividend will be increasing on the 28th of July to MYR0.015, with investors receiving 50% more than last year's MYR0.01. This makes the dividend yield about the same as the industry average at 3.8%.

View our latest analysis for PBA Holdings Bhd

PBA Holdings Bhd's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, PBA Holdings Bhd's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 11.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.035 in 2013 to the most recent total annual payment of MYR0.03. This works out to be a decline of approximately 1.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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 PBA Holdings Bhd has been growing its earnings per share at 12% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for PBA Holdings Bhd's prospects of growing its dividend payments in the future.

PBA Holdings Bhd Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. For instance, we've picked out 2 warning signs for PBA Holdings Bhd that investors should take into consideration. Is PBA Holdings Bhd 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.