Kimlun Corporation Berhad's (KLSE:KIMLUN) Upcoming Dividend Will Be Larger Than Last Year's

Kimlun Corporation Berhad (KLSE:KIMLUN) will increase its dividend from last year's comparable payment on the 24th of July to MYR0.02. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

We've discovered 2 warning signs about Kimlun Corporation Berhad. View them for free.

Kimlun Corporation Berhad's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Kimlun Corporation Berhad's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 32.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 8.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Kimlun Corporation Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was MYR0.03 in 2015, and the most recent fiscal year payment was MYR0.02. The dividend has shrunk at around 4.0% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Kimlun Corporation Berhad's earnings per share has shrunk at approximately 3.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Kimlun Corporation Berhad's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Kimlun Corporation Berhad is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good 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. To that end, Kimlun Corporation Berhad has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.