Innoprise Plantations Berhad (KLSE:INNO) Will Pay A Larger Dividend Than Last Year At MYR0.065

Innoprise Plantations Berhad (KLSE:INNO) will increase its dividend from last year's comparable payment on the 26th of March to MYR0.065. This takes the dividend yield to 8.8%, which shareholders will be pleased with.

Check out our latest analysis for Innoprise Plantations Berhad

Innoprise Plantations Berhad's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Innoprise Plantations Berhad was paying out 85% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

If the trend of the last few years continues, EPS will grow by 42.7% over the next 12 months. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 74% which brings it into quite a comfortable range.

Innoprise Plantations Berhad's Dividend Has Lacked Consistency

It's comforting to see that Innoprise Plantations Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of MYR0.02 in 2017 to the most recent total annual payment of MYR0.156. This means that it has been growing its distributions at 29% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Innoprise Plantations Berhad has impressed us by growing EPS at 43% per year over the past five years. However, Innoprise Plantations Berhad isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Innoprise Plantations Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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