Lii Hen Industries Bhd (KLSE: LIIHEN) pays less dividends than last year

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Lii Hen Industries Bhd’s (KLSE: LIIHEN) the dividend is reduced to 0.015 RM on December 30. This means that the dividend yield is 2.9% which is a bit low compared to other companies in the industry.

Check out our latest review for Lii Hen Industries Bhd

Lii Hen Industries Bhd Profits Easily Cover Distributions

While return is important, another factor to consider regarding a company’s dividend is whether current payout levels are achievable. The last installment was fairly easily covered by profits, but it represented 109% of cash flow. The company could focus more on returning cash to shareholders, but paying such a portion of its cash flow could expose the dividend to a reduction in the future.

Going forward, earnings per share are expected to increase 57.3% over the next year. If the dividend continues according to recent trends, we estimate that the payout ratio will be 24%, which is within the range that puts us at ease with the sustainability of the dividend.

Historic KLSE dividend: LIIHEN December 1, 2021

Dividend volatility

While 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 first annual payment in the past 10 years was RM 0.033 in 2011, and the most recent fiscal year payment was RM 0.14. This means that he increased his distributions by 15% per year during this period. It’s great to see strong growth in dividend payments, but the cuts are cause for concern as they may indicate the payment policy is too ambitious.

Dividend growth is questionable

With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate an increase in the dividend in the future. Over the past five years, earnings per share of Lii Hen Industries Bhd have declined by about 9.9% per year. If the company earns less over time, it naturally follows that it will also have to pay less dividends. Profits are expected to increase over the next year, but we will remain cautious until a history of earnings growth is established.

Lii Hen Industries Bhd dividend does not appear sustainable

In summary, reducing dividends is not ideal, but it can bring the payout into a more sustainable range. With no cash flow, it’s hard to see how the business can support the payment of a dividend. We would be a little cautious if we were relying on this security primarily for dividend income.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have selected 2 warning signs for Lii Hen Industries Bhd that investors should be aware of before committing capital to this stock. We have also set up a list of global stocks with a solid dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.


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