Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) Will Pay A Dividend Of MYR0.08

The board of Lysaght Galvanized Steel Berhad (KLSE:LYSAGHT) has announced that it will pay a dividend on the 29th of September, with investors receiving MYR0.08 per share. This makes the dividend yield 6.0%, which will augment investor returns quite nicely.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Lysaght Galvanized Steel Berhad's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Lysaght Galvanized Steel Berhad's dividend was only 70% of earnings, however it was paying out 282% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Earnings per share could rise by 11.1% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 203%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Lysaght Galvanized Steel Berhad

Lysaght Galvanized Steel Berhad's Dividend Has Lacked Consistency

Looking back, Lysaght Galvanized Steel Berhad's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. There hasn't been much of a change in the dividend over the last 9 years. 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 Lysaght Galvanized Steel Berhad has grown earnings per share at 11% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Lysaght Galvanized Steel Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lysaght Galvanized Steel Berhad's payments, as there could be some issues with sustaining them into the future. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.