Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) Has Announced That It Will Be Increasing Its Dividend To MYR0.03

Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to MYR0.03. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for Lysaght Galvanized Steel Berhad

Lysaght Galvanized Steel Berhad's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Lysaght Galvanized Steel Berhad's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 12.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 14%, which is definitely feasible to continue.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.12, compared to the most recent full-year payment of MYR0.03. This works out to a decline of approximately 75% 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 Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Lysaght Galvanized Steel Berhad's earnings per share has shrunk at 13% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Lysaght Galvanized Steel Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Lysaght Galvanized Steel Berhad has 3 warning signs (and 1 which shouldn't be ignored) 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.