LBS Bina Group Berhad (KLSE:LBS) Is Due To Pay A Dividend Of MYR0.011

The board of LBS Bina Group Berhad (KLSE:LBS) has announced that it will pay a dividend on the 25th of September, with investors receiving MYR0.011 per share. However, the dividend yield of 4.5% is still a decent boost to shareholder returns.

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LBS Bina Group Berhad's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, LBS Bina Group Berhad was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 147.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Check out our latest analysis for LBS Bina Group Berhad

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.0148 in 2015 to the most recent total annual payment of MYR0.021. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

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. LBS Bina Group Berhad has seen EPS rising for the last five years, at 12% per annum. LBS Bina Group Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On LBS Bina Group Berhad's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While LBS Bina Group Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for LBS Bina Group Berhad (of which 1 makes us a bit uncomfortable!) you should know about. 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.