LBS Bina Group Berhad (KLSE:LBS) Has Announced That It Will Be Increasing Its Dividend To MYR0.0125

The board of LBS Bina Group Berhad (KLSE:LBS) has announced that it will be paying its dividend of MYR0.0125 on the 14th of September, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.9%, which is in line with the average for the industry.

View our latest analysis for LBS Bina Group Berhad

LBS Bina Group Berhad's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, LBS Bina Group Berhad's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 20.6% over the next year. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of MYR0.0114 in 2013 to the most recent total annual payment of MYR0.025. This means that it has been growing its distributions at 8.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. LBS Bina Group Berhad might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

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. Unfortunately, LBS Bina Group Berhad's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If LBS Bina Group 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 LBS Bina Group Berhad's Dividend

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 dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. As an example, we've identified 1 warning sign for LBS Bina Group Berhad 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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