Hil Industries Berhad (KLSE:HIL) has announced that it will pay a dividend of MYR0.02 per share on the 6th of July. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Hil Industries Berhad

Hil Industries Berhad's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Hil Industries 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 37.7%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Hil Industries Berhad's Dividend Has Lacked Consistency

Hil Industries Berhad has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was MYR0.0125, compared to the most recent full-year payment of MYR0.02. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hil Industries Berhad has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Hil Industries Berhad's prospects of growing its dividend payments in the future.

Hil Industries Berhad Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Hil Industries Berhad that investors should know about before committing capital to this stock. 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.

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