Insas Berhad's (KLSE:INSAS) Dividend Will Be Increased To RM0.025

Insas Berhad's (KLSE:INSAS) dividend will be increasing to RM0.025 on 19th of January. Despite this raise, the dividend yield of 2.5% is only a modest boost to shareholder returns.

Check out our latest analysis for Insas Berhad

Insas Berhad's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Insas Berhad's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 4.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 8.7% by next year, which we think can be pretty sustainable going forward.

Insas Berhad's Dividend Has Lacked Consistency

Insas Berhad has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2012, the dividend has gone from RM0.013 to RM0.025. This means that it has been growing its distributions at 7.5% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Insas Berhad May Find It Hard To Grow The 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. Earnings per share has been crawling upwards at 4.3% per year. If Insas Berhad is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Insas Berhad's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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, Insas Berhad has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list 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.