LBS Bina Group Berhad (KLSE:LBS) Is Increasing Its Dividend To MYR0.0125

LBS Bina Group Berhad's (KLSE:LBS) periodic dividend will be increasing on the 14th of September to MYR0.0125, with investors receiving 25% more than last year's MYR0.01. This makes the dividend yield 5.2%, which is above the industry average.

View our latest analysis for LBS Bina Group Berhad

LBS Bina Group Berhad's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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.

The next year is set to see EPS grow by 19.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.0114 in 2013, and the most recent fiscal year payment was MYR0.025. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

LBS Bina Group Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. LBS Bina Group Berhad has seen earnings per share falling at 2.1% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think LBS Bina Group Berhad's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. For example, we've picked out 1 warning sign for LBS Bina Group Berhad that investors should know about before committing capital to this stock. 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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