Hil Industries Berhad (KLSE: HIL) increases dividend to RM 0.015

The advice of Hil Industries Berhad (KLSE: HIL) has announced that it will increase its dividend on August 18 to RM 0.015. The announced payout will bring the dividend yield to 1.5%, which is in line with the industry average.

See our latest review for Hil Industries Berhad

Hil Industries Berhad dividend well covered by earnings

We like to see a healthy dividend yield, but that only helps us if the payout can continue. However, prior to this announcement, Hil Industries Berhad’s dividend was comfortably covered by cash flow and earnings. As a result, much of what she earned was reinvested in the business.

Over the next year, EPS is expected to increase by 18.8%. If the dividend continues according to recent trends, we estimate that the payout ratio will be 18%, which is within the range that makes us comfortable with the sustainability of the dividend.

KLSE: Historic HIL dividend 23 May 2021

Dividend volatility

Although the company has been paying a dividend for a long time, it has reduced the dividend at least once in the past 10 years. The dividend went from RM 0.027 in 2011 to the most recent annual payment of RM 0.015. The dividend has decreased by approximately 5.7% per annum during this period. In general, we don’t like to see a dividend that goes down over time as this can degrade shareholder returns and indicate that the company may be in trouble.

We could see the Hil Industries Berhad dividend increase

Since dividend payments have shrunk like a glacier in a warming world, we need to check if there are any bright spots on the horizon. We are encouraged to see that Hil Industries Berhad has increased its earnings per share by 7.4% per year over the past five years. A low payout rate and decent growth suggests the company is reinvesting well and also has plenty of room to increase the dividend over time.

In summary

In summary, it’s great to see that the company can increase the dividend and keep it within a sustainable range. While payout ratios are a good sign, we’re less excited about the company’s record dividends. It looks like a good dividend paying stock going forward, but we note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favor companies with a consistent and stable dividend policy over those with an irregular policy. At the same time, there are other factors that our readers should be aware of before injecting capital into a stock. For example, we have chosen 2 warning signs for Hil Industries Berhad that investors should know before committing any capital to this stock. If you are a dividend investor, you can also view our organized list of high performing dividend stocks.

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About Warren Dockery

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