BP Plastics Holding Bhd's (KLSE:BPPLAS) Dividend Will Be MYR0.015

The board of BP Plastics Holding Bhd. (KLSE:BPPLAS) has announced that it will pay a dividend of MYR0.015 per share on the 11th of January. The dividend yield will be 4.7% based on this payment which is still above the industry average.

View our latest analysis for BP Plastics Holding Bhd

BP Plastics Holding Bhd's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

Looking forward, earnings per share is forecast to rise by 63.3% over the next year. If the dividend continues on this path, the payout ratio could be 35% 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. 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. 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.

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. BP Plastics Holding Bhd has impressed us by growing EPS at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

BP Plastics Holding Bhd Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for BP Plastics Holding Bhd that investors should take into consideration. Is BP Plastics Holding Bhd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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