DKLS Industries Berhad's (KLSE:DKLS) Dividend Will Be MYR0.03

The board of DKLS Industries Berhad (KLSE:DKLS) has announced that it will pay a dividend on the 18th of August, with investors receiving MYR0.03 per share. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for DKLS Industries Berhad

DKLS Industries Berhad's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, DKLS Industries Berhad was paying only paying out a fraction of earnings, but the payment was a massive 284% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 17.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that DKLS Industries Berhad has been growing its earnings per share at 17% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for DKLS Industries Berhad (of which 1 makes us a bit uncomfortable!) you should know about. Is DKLS Industries Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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