Nestlé (Malaysia) Berhad's (KLSE:NESTLE) Dividend Will Be MYR0.74
The board of Nestlé (Malaysia) Berhad (KLSE:NESTLE) has announced that it will pay a dividend of MYR0.74 per share on the 15th of May. Based on this payment, the dividend yield will be 2.3%, which is lower than the average for the industry.
View our latest analysis for Nestlé (Malaysia) Berhad
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 101% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Looking forward, earnings per share is forecast to rise by 38.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from MYR2.35 total annually to MYR1.79. Doing the maths, this is a decline of about 2.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Nestlé (Malaysia) Berhad's earnings per share has shrunk at approximately 9.2% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Nestlé (Malaysia) Berhad you should be aware of, and 1 of them is a bit concerning. Is Nestlé (Malaysia) Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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