Panasonic Manufacturing Malaysia: Increase in Dividend Despite Modest Growth Prospects

Panasonic Manufacturing Malaysia Berhad has announced an increase in the dividend to MYR 1.21 on September 20. This corresponds to an annual payout of 7.2% of the stock price, a level that surpasses the industry average. However, the sustainability of such dividends is in question. Prior to this announcement, the payout ratio was at 89% of earnings and more than 75% of free cash flows. This suggests that the company is currently more focused on distributing money to its shareholders rather than expanding the business. The forecast for next year anticipates an increase in earnings per share by 16.7%. Should the dividend policy remain unchanged, the payout ratio could rise to 81%. While this is high, it is still manageable. Despite a long history of dividend payments, the dividend has been cut at least once in the past ten years. For instance, the annual dividend decreased from MYR 1.88 in 2014 to the current MYR 1.36, representing an annual decline of about 3.2%. Such a downward trend is often not a good sign for investors seeking stable income. Rather, the development of earnings per share should be considered to assess the future prospects of the dividend. Over the past five years, these have decreased by 2.6% per year. Lower profits also mean lower dividend payouts in the long run. On the positive side, revenues are expected to rise in the coming year – however, caution is advised until a stable upward trend is established. Overall, Panasonic Manufacturing Malaysia Berhad currently does not appear to be an ideal income source. While the current dividend is attractive, it may not be sustainable, and the historical performance of payouts is also not convincing. For investors, companies with more stable dividend policies are likely of greater interest. However, there are also other aspects to consider when evaluating the performance of a stock.