PETRONAS Gas Berhad (KLSE:PETGAS) Has Announced A Dividend Of MYR0.16

PETRONAS Gas Berhad (KLSE:PETGAS) has announced that it will pay a dividend of MYR0.16 per share on the 22nd of September. This means the dividend yield will be fairly typical at 4.2%.

View our latest analysis for PETRONAS Gas Berhad

PETRONAS Gas Berhad's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, PETRONAS Gas Berhad was paying out 82% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 11.0%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75% - on the higher side, but we wouldn't necessarily say this is unsustainable.

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. Since 2013, the dividend has gone from MYR0.50 total annually to MYR0.72. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. 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.

Dividend Growth May Be Hard To Achieve

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. PETRONAS Gas Berhad hasn't seen much change in its earnings per share over the last five years.

PETRONAS Gas Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for PETRONAS Gas Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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