The board of Leong Hup International Berhad (KLSE:LHI) has announced that it will pay a dividend of MYR0.013 per share on the 27th of May. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Leong Hup International Berhad

Leong Hup International Berhad's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Leong Hup International Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 1.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 5.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Leong Hup International Berhad's Dividend Has Lacked Consistency

It's comforting to see that Leong Hup International Berhad has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of MYR0.016 in 2019 to the most recent total annual payment of MYR0.025. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Leong Hup International Berhad's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Leong Hup International Berhad has been growing its earnings per share at 8.6% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Leong Hup International Berhad's prospects of growing its dividend payments in the future.

We Really Like Leong Hup International Berhad's Dividend

Overall, we think that Leong Hup International Berhad could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Leong Hup International Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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