Yahoo Finance Bursa Malaysia Berhad's (KLSE:BURSA) Shareholders Will Receive A Smaller Dividend Than Last Year
Bursa Malaysia Berhad's (KLSE:BURSA) dividend is being reduced from last year's payment covering the same period to MYR0.115 on the 1st of March. The dividend yield will be in the average range for the industry at 3.9%.
Check out our latest analysis for Bursa Malaysia Berhad
Bursa Malaysia Berhad's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. At the time of the last dividend payment, Bursa Malaysia Berhad was paying out a very large proportion of what it was earning and 112% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
Over the next year, EPS is forecast to expand by 19.0%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 87% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.173 in 2013 to the most recent total annual payment of MYR0.265. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Bursa Malaysia Berhad hasn't seen much change in its earnings per share over the last five years. Slow growth and a high payout ratio could mean that Bursa Malaysia Berhad has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
Bursa Malaysia Berhad's Dividend Doesn't Look Sustainable
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.
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. For example, we've picked out 2 warning signs for Bursa Malaysia Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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