EITA Resources Berhad's (KLSE:EITA) Dividend Will Be MYR0.01

The board of EITA Resources Berhad (KLSE:EITA) has announced that it will pay a dividend on the 15th of January, with investors receiving MYR0.01 per share. This payment takes the dividend yield to 2.5%, which only provides a modest boost to overall returns.

View our latest analysis for EITA Resources Berhad

EITA Resources Berhad's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, EITA Resources Berhad's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 11.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 60%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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. Since 2013, the annual payment back then was MYR0.0175, compared to the most recent full-year payment of MYR0.02. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. 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 Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. EITA Resources Berhad's EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

EITA Resources Berhad's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for EITA Resources Berhad (of which 1 is a bit unpleasant!) you should know about. Is EITA Resources Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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