Stock Analysis

Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) Has Announced That It Will Be Increasing Its Dividend To MYR0.075

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Choo Bee Metal Industries Berhad's (KLSE:CHOOBEE) dividend will be increasing from last year's payment of the same period to MYR0.075 on 3rd of August. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.

See our latest analysis for Choo Bee Metal Industries Berhad

Choo Bee Metal Industries Berhad's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Choo Bee Metal Industries Berhad was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 23.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 8.4% by next year, which we think can be pretty sustainable going forward.

KLSE:CHOOBEE Historic Dividend July 14th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The last annual payment of MYR0.05 was flat on the annual payment from10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Choo Bee Metal Industries Berhad has seen EPS rising for the last five years, at 23% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Choo Bee Metal Industries Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Choo Bee Metal Industries Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for Choo Bee Metal Industries Berhad you should be aware of, and 1 of them is significant. Is Choo Bee Metal Industries Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.