Top 3 high yield and sustainable dividend stocks on Bursa Malaysia



KLSE weekly chart

Bursa Malaysia has performed poorly the past several years making it a challenge for investors to make capital gains from an investment in the Malaysia market. Corruption, political uncertainties and poor governance have (possibly) contributed to the poor market sentiment. Come Covid-19 to add to the already nervous market that had been holding onto threads waiting for the next bear market cycle to come for years and any hope of a swift recovery now seems further away.

While all these sentiments may affect stock prices, business will be business. Good businesses will still be good and should continue to make money. This profit may be translated into a rising stock price, but this can be greatly influenced by sentiment which may have little to do with the business itself. Another way that the business performance is translated to the shareholders is through dividends.

Even in a bull market, owning dividend stocks is a great proposition as it provides an extra source of income. In an uncertain market where capital appreciation may be limited – this is where dividend stocks will shine the most.

This post will look at 3 high yielding dividend stocks listed on Bursa Malaysia that may be sustainable for the long run which investors may look further into.

The criteria that I used for selecting these stocks are:



1.Dividend yield >4%

Why 4%?

Firstly because the average global inflation rate is currently 3+%. Although Malaysia’s inflation rate isn’t as high, the world is now very closely interconnected that we should consider the global picture.

Secondly because fixed deposits can offer up to 3+% returns. Considering the higher risk, one should expect more from stocks (although we are discounting the potential of capital gains).

Thirdly because it may contribute to the 4% rule which is my personal long term investment goal. Although there are critics of the rule and those that think it will not work, it is a minimum target that I aim to reach.

2.Sustained or growing dividend over >5 years

This goes without saying.

Regardless of their implied yield, I exclude stocks that have consistently reduced their dividends or have had massive dividend cuts.

While consistent year-after-year dividend growers are not absent, I have not been able to find them in much abundance. I have thus included stocks that have increased their dividend over the long term but may have had several years of stagnant dividends or even slight reductions.



3.Sustainable payout ratio

Payout ratio is the amount of dividend that a company pays to its shareholders over its net income.

Although the usual advocate is for a 40-60% payout ratio, I have chosen to be a bit less strict and accept a payout ratio of <80% other than for REITs which by law must pay a >90% payout ratio. The reason being that it is challenging to find companies that fulfill criteria 1 and 2 which also fulfill a 40-60% payout ratio.

4.Stable or growing earnings

I exclude companies that are not profit making or whose earnings are consistently shrinking.

5.Good future prospect for business

This is more of my own prediction. There is no science or mathematics that can accurately measure this as is there no science or mathematics that can accurately predict the future.

Stock choices:



1.UOA Development (UOADEV, 5200)

Source: malaysiastock.biz

1. Dividend yield

Uoadev 5 year average dividend is RM0.144. At the current price of around RM1.90/share, this gives it a dividend yield of 7.5%

2. Sustained or growing dividend over >5 years

Uoadev reduced its dividend last year which isn’t great. However it wasn’t a massive drop and it has been paying consistent dividends for years.

Uoadev having a dividend policy of 30-50% of post-tax profits is a redeeming factor for this in my opinion.



3. Sustainable payout ratio

With an EPS of RM0.23 and a dividend per share of 0.14 (2019 numbers), this gives uoadev a payout ratio of 70%.

4. Stable or growing earnings

Source: malaysiastock.biz

Uoadev’s earnings have varied year to year since it went public in 2011, ranging from around 20-30/year.

2. Bank Islam Malaysia Berhad (BIMB, 5258)

Source: malaysiastock.biz

Bimb is my 1st banking choice for dividend income investing although it is not the most favored banking stock nor the one with the highest yield. I chose Bimb over other banking stocks because of several factors:

  1. It is the only banking stock that is shariah compliant. This is the main reason I am placing it before other banking stocks (another of my favorite will be mentioned after this)
  2. It’s takaful business
  3. It is the one most likely to benefit the most from ‘Islamic Banking’
  4. It has a growing dividend

1. Dividend yield

Bimb’s 5 year average dividend yield is RM0.14. At the current price (at the time of writing) of RM3.45, this gives it a dividend yield of 4%.

2. Sustained or growing dividend

Although there was a dividend cut in 2015, Bimb has been paying a growing dividend every other year for the past 10 years at least.

3. Sustainable payout ratio

In 2019, with an EPS of 43.9 sen and a dividend of 16 sen, this gives BIMB a payout ratio of 36%.

4. Stable or growing earnings

Source: malaysiastock.biz

BIMBs profits have been quite consistent over the past 5 years and EPS has been growing over the longer term.

BIMB is also benefiting from Islamic Banking and a growing Takaful business



3. Al-Aqar REIT

No dividend portfolio is truly complete without REITs. Although there are varied opinions about REITs, I am of those in favor of this type of stock being part of a dividend portfolio.

In terms of performance, al-Aqar is not the best in my opinion however, I prefer it above other REITs because it is the only healthcare REIT on Bursa Malaysia.

Over the long term, I believe that healthcare should be quite resilient in and off itself.

It is also one of the handful of shariah compliant REITs traded on the KLSE.

1. Dividend yield

Al-Aqar REIT has been paying a rather consistent dividend of around RM0.077/share. At the current stock price of RM1.36, this gives it a yield of 5.66%.

2. Sustained or growing dividend

al-Aqar has been paying a consistent dividend

3. Sustainable payout ratio

This is less significant for REITs as they are required by law to pay out at least 90% of their earnings.

4. Stable or growing earnings

Al-Aqar’s earnings have been quite consistent throughout the years.



Income investing on Bursa Malaysia

Dividend income investing is one of the many ways that one can create wealth from the stock market.


Find out other ways you can make money from the stock market on netflyp.com

It may not provide as much or as fast a return as shorter term trading but it is arguably more predictable and more reliable than the later. Provided of course that one has the patience, the holding power, the power to dollar cost average and a longer term perspective.

Looking at the current market uncertainty, this method of securing a consistent and predictable cash flow is now more appealing than ever (with the nice bull run the past 10 years, who would look at a measly 4% return per year!). The massive market crash this past couple of weeks has also pushed prices lower, giving a much more appealing dividend yield.

Is dividend investing a viable strategy on Bursa Malaysia? Though it may not have as long and reliable a track record as the US markets, there are indeed good companies that pay regular dividends.

The above are 3 of the stocks on my Income watchlist. These are by no means the only good dividend stocks on Bursa Malaysia – nor even the very best.

One of the features that dividend income investors look for in stocks to put in their portfolio is dividend growth. On the US market there are the dividend heroes, dividend aristocrats and dividend kings. Little study has been done on stocks listed on the Bursa Malaysia. Hopefully this is about to change.

Upcoming post 🙂

After a bit of scouring, I have found several stocks listed on Bursa Malaysia that pay regular and growing dividends which investors may look further into to determine whether to have them in your portfolio. They also generally meet most of the criteria for a dividend stock that I have outlined above.

In order to not miss this list, please subscribe to netflyp Finance Magazine updates (its FREE!) so that you will be informed when the list is released.

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