Oriental Food Industries Holdings Berhad (KLSE:OFI) Is Paying Out A Larger Dividend Than Last Year

The board of Oriental Food Industries Holdings Berhad (KLSE:OFI) has announced that it will be increasing its dividend by 100% on the 10th of January to MYR0.01, up from last year's comparable payment of MYR0.005. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

Check out the opportunities and risks within the MY Food industry.

Oriental Food Industries Holdings Berhad's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Oriental Food Industries Holdings Berhad was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 8.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from MYR0.02 total annually to MYR0.028. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Oriental Food Industries Holdings Berhad Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Oriental Food Industries Holdings Berhad has seen EPS rising for the last five years, at 8.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Oriental Food Industries Holdings Berhad's Dividend

Overall, a dividend increase is always good, and we think that Oriental Food Industries Holdings Berhad is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Oriental Food Industries Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.