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. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.

See our latest analysis for Leong Hup International Berhad

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Leong Hup International Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 1.6%. If the dividend continues on this path, the payout ratio could be 5.0% by next year, which we think can be pretty sustainable going forward.

Leong Hup International Berhad's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of MYR0.016 in 2019 to the most recent total annual payment of MYR0.024. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Leong Hup International Berhad might have put its house in order since then, but we remain cautious.

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. Leong Hup International Berhad has seen EPS rising for the last five years, at 8.6% per annum. Leong Hup International Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Leong Hup International Berhad's Dividend

Overall, we like to see the dividend staying consistent, and we think Leong Hup International Berhad might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Leong Hup International 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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