LPI Capital Bhd (KLSE:LPI) Is Reducing Its Dividend To MYR0.35

LPI Capital Bhd (KLSE:LPI) has announced that on 2nd of March, it will be paying a dividend ofMYR0.35, which a reduction from last year's comparable dividend. This means that the annual payment will be 4.7% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for LPI Capital Bhd

LPI Capital Bhd's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment made up 86% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 15.4%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was MYR0.361, compared to the most recent full-year payment of MYR0.60. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. LPI Capital Bhd has seen earnings per share falling at 2.5% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On LPI Capital Bhd's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for LPI Capital Bhd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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