Hong Leong Bank Berhad (KLSE:HLBANK) Is Increasing Its Dividend To MYR0.43

The board of Hong Leong Bank Berhad (KLSE:HLBANK) has announced that it will be paying its dividend of MYR0.43 on the 19th of November, an increased payment from last year's comparable dividend. This takes the annual payment to 3.2% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Hong Leong Bank Berhad

Hong Leong Bank Berhad's Payment Expected To Have Solid Earnings Coverage

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, Hong Leong Bank Berhad has a long history of paying out a part of its earnings to shareholders. Based on Hong Leong Bank Berhad's last earnings report, the payout ratio is at a decent 33%, 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 24.1% over the next 3 years. Analysts forecast the future payout ratio could be 36% over the same time horizon, which is a number we think the company can maintain.

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. The dividend has gone from an annual total of MYR0.45 in 2014 to the most recent total annual payment of MYR0.68. This implies that the company grew its distributions at a yearly rate of about 4.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See Hong Leong Bank Berhad's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Hong Leong Bank Berhad has been growing its earnings per share at 9.5% a year over the past five years. Hong Leong Bank Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Hong Leong Bank Berhad's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Hong Leong Bank Berhad that you should be aware of before investing. Is Hong Leong 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.