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

The board of Hong Leong Capital Berhad (KLSE:HLCAP) has announced that it will be increasing its dividend on the 16th of November to RM0.26. Although the dividend is now higher, the yield is only 3.9%, which is below the industry average.

See our latest analysis for Hong Leong Capital Berhad

Hong Leong Capital Berhad's Payment Has 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, prior to this announcement, Hong Leong Capital Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 27.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Hong Leong Capital Berhad Doesn't Have A Long Payment History

It is great to see that Hong Leong Capital Berhad has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from RM0.15 in 2014 to the most recent annual payment of RM0.26. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Hong Leong Capital Berhad to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Hong Leong Capital Berhad has seen EPS rising for the last five years, at 27% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Hong Leong Capital Berhad's Dividend

Overall, a dividend increase is always good, and we think that Hong Leong Capital Berhad is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Hong Leong Capital Berhad that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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