The board of Panasonic Manufacturing Malaysia Berhad (KLSE:PANAMY) has announced that it will pay a dividend of MYR0.15 per share on the 19th of January. The dividend yield will be 6.8% based on this payment which is still above the industry average.
Panasonic Manufacturing Malaysia Berhad's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Panasonic Manufacturing Malaysia Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 116% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.
Over the next year, EPS is forecast to expand by 23.4%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MYR1.88 in 2013, and the most recent fiscal year payment was MYR1.22. The dividend has shrunk at around 4.2% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Panasonic Manufacturing Malaysia Berhad's EPS has declined at around 8.9% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Panasonic Manufacturing Malaysia Berhad's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. For example, we've picked out 1 warning sign for Panasonic Manufacturing 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.