Stock Analysis

Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) Will Pay A Larger Dividend Than Last Year At RM0.075

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Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) has announced that it will be increasing its dividend on the 3rd of August to RM0.075, which will be 150% higher than last year. This will take the dividend yield from 1.3% to 3.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Choo Bee Metal Industries Berhad

Choo Bee Metal Industries Berhad's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Choo Bee Metal Industries Berhad was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 33.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 6.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

KLSE:CHOOBEE Historic Dividend May 2nd 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from RM0.05 in 2012 to the most recent annual payment of RM0.03. This works out to be a decline of approximately 5.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Choo Bee Metal Industries Berhad has seen EPS rising for the last five years, at 33% 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, we always like to see the dividend being raised, but we don't think Choo Bee Metal Industries Berhad will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Choo Bee Metal Industries Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Choo Bee Metal Industries Berhad (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Choo Bee Metal Industries Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.