Oriental Food Industries Holdings Berhad's (KLSE:OFI) Shareholders Will Receive A Bigger Dividend Than Last Year

Oriental Food Industries Holdings Berhad's (KLSE:OFI) dividend will be increasing from last year's payment of the same period to MYR0.02 on 15th of April. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

See our latest analysis for Oriental Food Industries Holdings Berhad

Oriental Food Industries Holdings 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. However, Oriental Food Industries Holdings Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 23.4% over the next 12 months. 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 2014, the dividend has gone from MYR0.02 total annually to MYR0.03. This means that it has been growing its distributions at 4.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Oriental Food Industries Holdings Berhad has seen EPS rising for the last five years, at 23% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Oriental Food Industries Holdings Berhad Looks Like A Great Dividend Stock

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. 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. See if management have their own wealth at stake, by checking insider shareholdings in Oriental Food Industries Holdings Berhad stock. Looking for more high-yielding dividend ideas? Try our collection 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.