BP Plastics Holding Bhd (KLSE:BPPLAS) Will Pay A Smaller Dividend Than Last Year

BP Plastics Holding Bhd's (KLSE:BPPLAS) dividend is being reduced from last year's payment covering the same period to MYR0.015 on the 7th of April. The yield is still above the industry average at 4.4%.

See our latest analysis for BP Plastics Holding Bhd

BP Plastics Holding Bhd's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. But before making this announcement, BP Plastics Holding Bhd's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 29.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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 MYR0.0533. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BP Plastics Holding Bhd might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

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. It's encouraging to see that BP Plastics Holding Bhd has been growing its earnings per share at 19% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On BP Plastics Holding 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 hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think BP Plastics Holding Bhd is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for BP Plastics Holding 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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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.