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Allianz Malaysia Berhad (KLSE:ALLIANZ) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of February to MYR0.69. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.
See our latest analysis for Allianz Malaysia Berhad
Allianz Malaysia Berhad's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Allianz Malaysia Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 1.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.
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 MYR0.0525 total annually to MYR0.85. This means that it has been growing its distributions at 32% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Although it's important to note that Allianz Malaysia Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Allianz Malaysia Berhad has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Allianz Malaysia Berhad's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Allianz Malaysia Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.