Mah Sing Group Berhad (KLSE:MAHSING) has announced that it will be increasing its periodic dividend on the 21st of September to MYR0.03, which will be 13% higher than last year's comparable payment amount of MYR0.0265. This takes the annual payment to 5.0% of the current stock price, which is about average for the industry.

View our latest analysis for Mah Sing Group Berhad

Mah Sing Group Berhad's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Mah Sing Group Berhad was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 42.6%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 10 years was MYR0.0507 in 2013, and the most recent fiscal year payment was MYR0.03. The dividend has shrunk at around 5.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Mah Sing Group Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mah Sing Group Berhad's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Mah Sing Group Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.