Fibon Berhad (KLSE:FIBON) Has Affirmed Its Dividend Of MYR0.011

Fibon Berhad (KLSE:FIBON) has announced that it will pay a dividend of MYR0.011 per share on the 29th of December. Based on this payment, the dividend yield will be 2.5%, which is fairly typical for the industry.

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Fibon Berhad's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, based ont he last payment, Fibon Berhad was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share could rise by 25.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Fibon Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was MYR0.0105 in 2015, and the most recent fiscal year payment was MYR0.011. Its dividends have grown at less than 1% per annum over this time frame. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Fibon Berhad has impressed us by growing EPS at 25% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Fibon Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Fibon Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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