Stock Analysis

IHH Healthcare Berhad (KLSE:IHH) Has Announced That It Will Be Increasing Its Dividend To MYR0.07

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IHH Healthcare Berhad (KLSE:IHH) will increase its dividend from last year's comparable payment on the 28th of April to MYR0.07. The payment will take the dividend yield to 1.2%, which is in line with the average for the industry.

View our latest analysis for IHH Healthcare Berhad

IHH Healthcare Berhad's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, IHH Healthcare Berhad's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 47.2%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

KLSE:IHH Historic Dividend March 16th 2023

IHH Healthcare Berhad Doesn't Have A Long Payment History

IHH Healthcare Berhad's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from MYR0.02 total annually to MYR0.07. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that IHH Healthcare Berhad has been growing its earnings per share at 8.5% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like IHH Healthcare Berhad's Dividend

Overall, a dividend increase is always good, and we think that IHH Healthcare 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 21 analysts we track are forecasting for IHH Healthcare Berhad for free with public analyst estimates for the company. 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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