Leon Fuat Berhad (KLSE:LEONFB) Has Announced A Dividend Of MYR0.015

Leon Fuat Berhad (KLSE:LEONFB) has announced that it will pay a dividend of MYR0.015 per share on the 19th of July. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Leon Fuat Berhad

Leon Fuat Berhad's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Leon Fuat Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 8.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from MYR0.03 total annually to MYR0.015. This works out to be a decline of approximately 6.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Leon Fuat Berhad has grown earnings per share at 8.7% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Leon Fuat Berhad's prospects of growing its dividend payments in the future.

Our Thoughts On Leon Fuat Berhad's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Leon Fuat Berhad you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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