Yahoo Finance IOI Corporation Berhad (KLSE:IOICORP) Has Announced That Its Dividend Will Be Reduced To MYR0.045
IOI Corporation Berhad (KLSE:IOICORP) is reducing its dividend from last year's comparable payment to MYR0.045 on the 21st of March. This means that the dividend yield is 2.2%, which is a bit low when comparing to other companies in the industry.
View our latest analysis for IOI Corporation Berhad
IOI Corporation Berhad's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, IOI Corporation Berhad was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
Looking forward, earnings per share is forecast to rise by 50.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from MYR0.155 total annually to MYR0.09. This works out to be a decline of approximately 5.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, IOI Corporation Berhad has only grown its earnings per share at 4.5% per annum over the past five years. IOI Corporation Berhad is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
In Summary
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments IOI Corporation Berhad has been making. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for IOI Corporation Berhad that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
