Hong Leong Industries Berhad's (KLSE:HLIND) Dividend Will Be MYR0.37

Hong Leong Industries Berhad's (KLSE:HLIND) investors are due to receive a payment of MYR0.37 per share on 25th of June. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.

Check out our latest analysis for Hong Leong Industries Berhad

Hong Leong Industries Berhad Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Hong Leong Industries Berhad's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 2.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 104%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from MYR0.26 total annually to MYR0.57. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Hong Leong Industries Berhad might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

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. Unfortunately, Hong Leong Industries Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company has been growing at a pretty soft 0.2% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Hong Leong Industries Berhad's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Hong Leong Industries Berhad has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Hong Leong Industries Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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