Petron Malaysia Refining & Marketing BHD's (KLSE:PETRONM)'s dividend will be reduced to RM0.23 on July 4 from the same period paid last year. In other words, the dividend yield is 4.7%, which is slightly lower than other companies in the same industry.
Check out our latest analysis for Petron Malaysia Refining & Marketing Bhd.
Petron Malaysia Refining & Marketing Bhd's earnings easily cover distributions
It's good to see a high yield, but you also need to see if the higher dividend level is sustainable. However, prior to this announcement, Petron Malaysia Refining & Marketing Bhd's dividend was comfortably covered by both cash flow and profit. As a result, a large portion of the profits have been reinvested into the business.
If recent trends continue, EPS could expand by 3.9% over the next 12 months. If the dividend continues at this rate, the payout ratio could be 22% by next year, which we think is quite sustainable going forward.
Dividend volatility
The company has a long history of paying dividends, but it has cut its dividend at least once in the past 10 years. Dividends totaled RM0.23 per year in the most recent year, up from a total of RM0.14 per year in 2014. This means it has grown its distribution at a rate of 5.1% per year over that time. We've seen cuts in the past, so while the growth looks promising, we'd be a little cautious about its track record.
Dividend increases may be difficult to achieve
With a relatively unstable dividend, it's even more important to see if earnings per share are growing. Over the past five years, earnings have grown at 3.9% per year, which is admittedly a bit slow. Although the EPS growth rate is very low, Petron Malaysia Refining & Marketing Bhd has the option to increase the payout ratio in order to return more cash to shareholders.
In summary
Although the dividend was reduced this year, we believe Petron Malaysia Refining & Marketing Bhd has the ability to make stable payments in the future. Although the dividend payout ratio seems good, unfortunately the company's dividend track record is not that great. We think this will continue to be a promising dividend stock, but note that the payout ratio has been high in the past and could do so again.
Investors generally prefer companies with consistent and stable dividend policies over companies with irregular dividend policies. However, there are other things investors should consider when analyzing stock performance. For example, we chose 1 warning sign for Petron Malaysia Refining & Marketing Bhd Investors should consider this. Is Petron Malaysia Refining & Marketing Bhd the opportunity you've been looking for? Why not check it out? Selection of high dividend stocks.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
