Heineken Malaysia Berhad (KLSE:HEIM) Will Pay A Dividend Of MYR0.88

Heineken Malaysia Berhad's (KLSE:HEIM) investors are due to receive a payment of MYR0.88 per share on 25th of July. However, the dividend yield of 5.6% is still a decent boost to shareholder returns.

Check out our latest analysis for Heineken Malaysia Berhad

Heineken Malaysia Berhad's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the dividend made up 87% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 16.5%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.685 in 2014 to the most recent total annual payment of MYR1.28. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Heineken Malaysia Berhad might have put its house in order since then, but we remain cautious.

There Isn't Much Room To Grow The Dividend

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. Heineken Malaysia Berhad has impressed us by growing EPS at 6.5% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Heineken 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Heineken Malaysia Berhad that investors should take into consideration. Is Heineken Malaysia Berhad 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.