Hong Leong Industries Berhad's (KLSE:HLIND) Shareholders Will Receive A Bigger Dividend Than Last Year

Hong Leong Industries Berhad (KLSE:HLIND) has announced that it will be increasing its periodic dividend on the 20th of June to MYR0.37, which will be 5.7% higher than last year's comparable payment amount of MYR0.35. This makes the dividend yield about the same as the industry average at 5.9%.

Check out our latest analysis for Hong Leong Industries Berhad

Hong Leong Industries Berhad's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Hong Leong Industries Berhad was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 18.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2013, the dividend has gone from MYR0.24 total annually to MYR0.55. This implies that the company grew its distributions at a yearly rate of about 8.6% 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 Looks Likely To Grow

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. Hong Leong Industries Berhad has impressed us by growing EPS at 19% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Hong Leong Industries Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Hong Leong Industries Berhad is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Hong Leong Industries Berhad (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.