P.I.E. Industrial Berhad (KLSE:PIE) Has Announced That Its Dividend Will Be Reduced To MYR0.05

P.I.E. Industrial Berhad (KLSE:PIE) is reducing its dividend to MYR0.05 on the 20th of Junewhich is 29% less than last year's comparable payment of MYR0.07. This means that the dividend yield is 1.5%, which is a bit low when comparing to other companies in the industry.

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P.I.E. Industrial Berhad's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, P.I.E. Industrial Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 125.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

View our latest analysis for P.I.E. Industrial Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.05 in 2015 to the most recent total annual payment of MYR0.07. This means that it has been growing its distributions at 3.4% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

P.I.E. Industrial Berhad Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. P.I.E. Industrial Berhad has impressed us by growing EPS at 7.8% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Even though the dividend was cut this year, we think P.I.E. Industrial Berhad has the ability to make consistent payments 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for P.I.E. Industrial Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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