Ajinomoto (Malaysia) Berhad (KLSE:AJI) Will Pay A Dividend Of MYR0.384

The board of Ajinomoto (Malaysia) Berhad (KLSE:AJI) has announced that it will pay a dividend on the 25th of September, with investors receiving MYR0.384 per share. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

Check out our latest analysis for Ajinomoto (Malaysia) Berhad

Ajinomoto (Malaysia) Berhad's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Ajinomoto (Malaysia) Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 48.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

historic-dividend

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. Since 2014, the annual payment back then was MYR0.20, compared to the most recent full-year payment of MYR0.384. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ajinomoto (Malaysia) Berhad might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Ajinomoto (Malaysia) Berhad has grown earnings per share at 48% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Ajinomoto (Malaysia) Berhad Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Ajinomoto (Malaysia) Berhad you should be aware of, and 1 of them can't be ignored. Is Ajinomoto (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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com