RHB Bank Berhad (KLSE:RHBBANK) Has Affirmed Its Dividend Of MYR0.25

RHB Bank Berhad's (KLSE:RHBBANK) investors are due to receive a payment of MYR0.25 per share on 16th of May. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for RHB Bank Berhad

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 8 years, RHB Bank Berhad has a good history of paying out a part of its earnings to shareholders. Based on RHB Bank Berhad's last earnings report, the payout ratio is at a decent 61%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 16.4% over the next 3 years. Analysts forecast the future payout ratio could be 56% over the same time horizon, which is a number we think the company can maintain.

RHB Bank Berhad's Dividend Has Lacked Consistency

RHB Bank Berhad has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from MYR0.10 total annually to MYR0.40. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

RHB Bank Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings has been rising at 2.6% per annum over the last five years, which admittedly is a bit slow. RHB Bank Berhad is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On RHB Bank Berhad's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for RHB Bank Berhad that you should be aware of before investing. Is RHB Bank Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.