Hil Industries Berhad (KLSE:HIL) Is Due To Pay A Dividend Of MYR0.03

Hil Industries Berhad (KLSE:HIL) will pay a dividend of MYR0.03 on the 3rd of July. Based on this payment, the dividend yield on the company's stock will be 3.9%, which is an attractive boost to shareholder returns.

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Hil Industries Berhad's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Hil 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 is forecast to fall by 7.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 32%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Hil Industries Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of MYR0.0125 in 2015 to the most recent total annual payment of MYR0.03. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hil Industries Berhad has seen EPS rising for the last five years, at 8.6% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Hil Industries Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hil Industries Berhad's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Hil Industries Berhad is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Hil Industries Berhad (of which 1 is a bit concerning!) 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.