Carlsberg Brewery Malaysia Berhad's( KLSE:CARLSBG ) dividend will be increasing from last year's payment of the same period to MYR0.25 on 12th of January. This will take the dividend yield to an attractive 6.0%, providing a nice boost to shareholder returns.
Carlsberg Brewery Malaysia Berhad's Future Dividend Projections Appear Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Earnings per share is forecast to rise by 12.8% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.
See our latest analysis for Carlsberg Brewery Malaysia Berhad
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from MYR0.71 total annually to MYR1.00. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. 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.
Dividend Growth Could Be Constrained
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Carlsberg Brewery Malaysia Berhad has seen EPS rising for the last five years, at 13% per annum. 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.
Our Thoughts On Carlsberg Brewery Malaysia Berhad's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Carlsberg Brewery Malaysia Berhad has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Carlsberg Brewery Malaysia 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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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.
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