Thong Guan Industries Berhad (KLSE:TGUAN) Will Pay A Dividend Of MYR0.0125

Thong Guan Industries Berhad (KLSE:TGUAN) has announced that it will pay a dividend of MYR0.0125 per share on the 18th of January. The dividend yield is 2.2% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out the opportunities and risks within the MY Packaging industry.

Thong Guan Industries Berhad's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Thong Guan Industries Berhad's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 76.3%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

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 MYR0.03 in 2012 to the most recent total annual payment of MYR0.055. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Thong Guan Industries Berhad might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Thong Guan Industries Berhad hasn't seen much change in its earnings per share over the last five years. If Thong Guan Industries Berhad is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Thong Guan Industries 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 Thong Guan Industries Berhad is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Thong Guan Industries Berhad (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.