BP Plastics Holding Bhd (KLSE:BPPLAS) Has Affirmed Its Dividend Of MYR0.015

The board of BP Plastics Holding Bhd. (KLSE:BPPLAS) has announced that it will pay a dividend on the 12th of October, with investors receiving MYR0.015 per share. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

View our latest analysis for BP Plastics Holding Bhd

BP Plastics Holding Bhd's Payment Has 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, BP Plastics Holding Bhd'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.

Over the next year, EPS is forecast to expand by 55.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of MYR0.0267 in 2013 to the most recent total annual payment of MYR0.055. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that BP Plastics Holding Bhd has grown earnings per share at 11% per 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 BP Plastics Holding Bhd's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for BP Plastics Holding Bhd that investors should take into consideration. 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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