Public Bank Berhad (KLSE:PBBANK) Is Increasing Its Dividend To MYR0.09

Public Bank Berhad (KLSE:PBBANK) will increase its dividend from last year's comparable payment on the 22nd of September to MYR0.09. Despite this raise, the dividend yield of 3.3% is only a modest boost to shareholder returns.

Check out our latest analysis for Public Bank Berhad

Public Bank Berhad's Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having distributed dividends for at least 10 years, Public Bank Berhad has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Public Bank Berhad's payout ratio of 53% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 10.6%. The future payout ratio could be 51% over that time period, according to analyst estimates, which is a good look for the future of the 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 2013, the dividend has gone from MYR0.10 total annually to MYR0.14. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.0% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 3.0% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Public Bank Berhad's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Public Bank 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.