Hextar Industries Berhad (KLSE:HEXIND) Is Due To Pay A Dividend Of MYR0.01

Hextar Industries Berhad (KLSE:HEXIND) has announced that it will pay a dividend of MYR0.01 per share on the 15th of March. This makes the dividend yield 5.3%, which will augment investor returns quite nicely.

Check out our latest analysis for Hextar Industries Berhad

Hextar Industries Berhad's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Hextar Industries Berhad's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Earnings per share could rise by 37.9% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

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. Since 2014, the dividend has gone from MYR0.03 total annually to MYR0.02. Doing the maths, this is a decline of about 4.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Hextar Industries Berhad's Dividend Might Lack Growth

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. It's encouraging to see that Hextar Industries Berhad has been growing its earnings per share at 38% a year over the past five years. Although earnings per share is up nicely Hextar Industries Berhad is paying out 131% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On Hextar Industries Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hextar Industries Berhad's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Hextar Industries Berhad is a great stock to add to your portfolio if income is your focus.

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 2 warning signs for Hextar Industries Berhad that you should be aware of before investing. 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.