Hup Seng Industries Berhad (KLSE:HUPSENG) Will Pay A Dividend Of MYR0.02

Hup Seng Industries Berhad's (KLSE:HUPSENG) investors are due to receive a payment of MYR0.02 per share on 7th of October. Based on this payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.

Check out our latest analysis for Hup Seng Industries Berhad

Hup Seng Industries Berhad's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Hup Seng Industries Berhad was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 7.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from MYR0.0495 total annually to MYR0.04. The dividend has shrunk at around 2.1% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Hup Seng Industries Berhad May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.4% per year. The company has been growing at a pretty soft 3.4% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Hup Seng Industries Berhad that you should be aware of before investing. Is Hup Seng Industries Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.