Tong Herr Resources Berhad (KLSE:TONGHER) Will Pay A Smaller Dividend Than Last Year

Tong Herr Resources Berhad (KLSE:TONGHER) has announced that on 18th of June, it will be paying a dividend ofMYR0.033, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 2.4%, which only provides a modest boost to overall returns.

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Tong Herr Resources Berhad's Projections Indicate Future Payments May Be Unsustainable

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

If the company can't turn things around, EPS could fall by 38.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 477%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for Tong Herr Resources Berhad

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 2015, the dividend has gone from MYR0.12 total annually to MYR0.033. This works out to a decline of approximately 73% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Tong Herr Resources Berhad's EPS has fallen by approximately 39% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Tong Herr Resources Berhad's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Tong Herr Resources Berhad (2 are a bit concerning!) that you should be aware of before investing. 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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