Panasonic Manufacturing Malaysia Berhad (KLSE: PANAMY) will pay a dividend of RM 0.15 on January 21. This payout means that the dividend yield will be 5.5%, which is close to the industry average.
Check out our latest review for Panasonic Manufacturing Malaysia Berhad
Panasonic Manufacturing Malaysia Berhad does not earn enough to cover payments
Unless the payments are sustainable, the dividend yield doesn’t mean much. Prior to this announcement, the company’s dividend outweighed its profits. Without increased earnings and cash flow, it would be difficult for the company to continue paying the dividend at this level.
The next 12 months are expected to see EPS increase 7.6%. Assuming the dividend continues according to recent trends, we think the payout ratio could reach 107%, which probably can’t continue to put some pressure on the balance sheet.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. Since 2011, the dividend has increased from RM 1.20 to RM 1.63. This implies that the company has increased its distributions at an annual rate of approximately 3.1% over this period. We are happy to see that the dividend has increased, but with a limited growth rate and fluctuations in payments, the total shareholder return may be limited.
Dividend growth is questionable
With a relatively volatile dividend, it’s even more important to see if earnings per share go up. It’s not great to see that Panasonic Manufacturing Malaysia Berhad’s earnings per share have fallen by around 7.1% per year over the past five years. Falling profits will inevitably lead the company to pay a lower dividend in line with lower profits. Profits are expected to rise over the next 12 months and if that happens we could still be a little cautious until it becomes a trend.
We are not big fans of the Panasonic Manufacturing Malaysia Berhad dividend
Overall, it is not a good candidate for an income investment, although the dividend has remained stable this year. The company doesn’t earn enough to pay as much as it does, and the other factors don’t look particularly promising either. We don’t think this is a great candidate to be an income stock.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. For example, we have identified 2 warning signs for Panasonic Manufacturing Malaysia Berhad (1 makes us a little uncomfortable!) Which you should be aware of before investing. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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