Hap Seng Consolidated Berhad (KLSE:HAPSENG) Is Due To Pay A Dividend Of MYR0.10

Hap Seng Consolidated Berhad (KLSE:HAPSENG) will pay a dividend of MYR0.10 on the 27th of June. Based on this payment, the dividend yield will be 5.5%, which is fairly typical for the industry.

View our latest analysis for Hap Seng Consolidated Berhad

Hap Seng Consolidated Berhad's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Hap Seng Consolidated Berhad was paying out 70% of earnings, but a comparatively small 72% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

If the company can't turn things around, EPS could fall by 5.1% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 76%, meaning that most of the company's earnings is being paid out to shareholders.

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 annual payment during the last 10 years was MYR0.16 in 2014, and the most recent fiscal year payment was MYR0.25. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. 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.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Hap Seng Consolidated Berhad's earnings per share has fallen at approximately 5.1% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Hap Seng Consolidated Berhad's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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 instance, we've picked out 2 warning signs for Hap Seng Consolidated Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.