Hibiscus Petroleum Berhad (KLSE:HIBISCS) Will Pay A Dividend Of MYR0.015

Hibiscus Petroleum Berhad (KLSE:HIBISCS) has announced that it will pay a dividend of MYR0.015 per share on the 25th of October. Including this payment, the dividend yield on the stock will be 3.4%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Hibiscus Petroleum Berhad

Hibiscus Petroleum Berhad's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Hibiscus Petroleum Berhad was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 12.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Hibiscus Petroleum Berhad's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 4 years was MYR0.025 in 2020, and the most recent fiscal year payment was MYR0.075. This means that it has been growing its distributions at 32% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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 Hibiscus Petroleum Berhad has grown earnings per share at 10% per year over the past five years. Hibiscus Petroleum Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Hibiscus Petroleum Berhad's Dividend

Overall, we like to see the dividend staying consistent, and we think Hibiscus Petroleum Berhad might even raise payments in the future. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For example, we've picked out 1 warning sign for Hibiscus Petroleum 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 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.