Stock Analysis

Choo Bee Metal Industries Berhad's (KLSE:CHOOBEE) Shareholders Will Receive A Bigger Dividend Than Last Year

KLSE:CHOOBEE
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The board of Choo Bee Metal Industries Berhad (KLSE:CHOOBEE) has announced that it will be increasing its dividend on the 3rd of August to RM0.075. This will take the annual payment from 2.6% to 3.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Choo Bee Metal Industries Berhad

Choo Bee Metal Industries Berhad's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Choo Bee Metal Industries Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 23.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.4% by next year, which is in a pretty sustainable range.

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KLSE:CHOOBEE Historic Dividend June 26th 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The most recent annual payment of RM0.05 is about the same as the first annual payment 10 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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. We are encouraged to see that Choo Bee Metal Industries Berhad has grown earnings per share at 23% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Choo Bee Metal Industries Berhad has 3 warning signs (and 1 which is concerning) we think 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.

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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.