P.I.E. Industrial Berhad's (KLSE:PIE) Upcoming Dividend Will Be Larger Than Last Year's

P.I.E. Industrial Berhad (KLSE:PIE) will increase its dividend on the 20th of June to RM0.07, which is 40% higher than last year. This makes the dividend yield 2.4%, which is above the industry average.

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

P.I.E. Industrial Berhad's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, P.I.E. Industrial Berhad was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 22.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from RM0.058 in 2012 to the most recent annual payment of RM0.05. This works out to be a decline of approximately 1.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that P.I.E. Industrial Berhad has grown earnings per share at 11% 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

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While P.I.E. Industrial Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think P.I.E. Industrial 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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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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.