Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) Has Announced A Dividend Of MYR0.07

Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) has announced that it will pay a dividend of MYR0.07 per share on the 17th of July. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.

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Lysaght Galvanized Steel Berhad's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Lysaght Galvanized Steel Berhad was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Earnings per share could rise by 6.8% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 141%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Lysaght Galvanized Steel Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from MYR0.12 total annually to MYR0.15. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Lysaght Galvanized Steel Berhad Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Lysaght Galvanized Steel Berhad has been growing its earnings per share at 6.8% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 2 warning signs for Lysaght Galvanized Steel Berhad that investors need to be conscious of moving forward. Is Lysaght Galvanized Steel Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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