Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) Has Announced That Its Dividend Will Be Reduced To MYR0.025

Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) is reducing its dividend from last year's comparable payment to MYR0.025 on the 3rd of August. The dividend yield of 2.6% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for Choo Bee Metal Industries Berhad

Choo Bee Metal Industries Berhad Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Choo Bee Metal Industries Berhad isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could rise by 17.7% over the next year if the trend from the last few years continues. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.0278, compared to the most recent full-year payment of MYR0.025. This works out to be a decline of approximately 1.1% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

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. We are encouraged to see that Choo Bee Metal Industries Berhad has grown earnings per share at 18% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

Our Thoughts On Choo Bee Metal Industries Berhad'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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income 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. As an example, we've identified 2 warning signs for Choo Bee Metal Industries Berhad 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.