LBS Bina Group Berhad (KLSE:LBS) Will Pay A Dividend Of RM0.01

The board of LBS Bina Group Berhad (KLSE:LBS) has announced that it will pay a dividend on the 15th of September, with investors receiving RM0.01 per share. This payment means that the dividend yield will be 4.4%, which is around the industry average.

View our latest analysis for LBS Bina Group Berhad

LBS Bina Group Berhad's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, LBS Bina Group Berhad was easily earning enough to cover the dividend. 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 11.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

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 RM0.011 in 2012 to the most recent annual payment of RM0.02. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year 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.

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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. LBS Bina Group Berhad has seen earnings per share falling at 4.1% 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 predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On LBS Bina Group Berhad's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. To that end, LBS Bina Group Berhad has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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