7-Eleven Malaysia Holdings Berhad's (KLSE:SEM) periodic dividend will be increasing on the 25th of May to MYR0.054, with investors receiving 108% more than last year's MYR0.026. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

View our latest analysis for 7-Eleven Malaysia Holdings Berhad

7-Eleven Malaysia Holdings Berhad's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, 7-Eleven Malaysia Holdings Berhad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 52.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

7-Eleven Malaysia Holdings Berhad's Dividend Has Lacked Consistency

Looking back, 7-Eleven Malaysia Holdings Berhad's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of MYR0.025 in 2015 to the most recent total annual payment of MYR0.026. Its dividends have grown at less than 1% per annum over this time frame. 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.

We Could See 7-Eleven Malaysia Holdings Berhad's Dividend Growing

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. 7-Eleven Malaysia Holdings Berhad has impressed us by growing EPS at 6.5% per year over the past five years. 7-Eleven Malaysia Holdings Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On 7-Eleven Malaysia Holdings Berhad's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for 7-Eleven Malaysia Holdings Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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