Fima Corporation Berhad (KLSE:FIMACOR) Has Announced A Dividend Of MYR0.075

Fima Corporation Berhad (KLSE:FIMACOR) has announced that it will pay a dividend of MYR0.075 per share on the 2nd of August. Based on this payment, the dividend yield on the company's stock will be 6.9%, which is an attractive boost to shareholder returns.

View our latest analysis for Fima Corporation Berhad

Fima Corporation Berhad Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 81% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

If the company can't turn things around, EPS could fall by 19.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 187%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.14 in 2014 to the most recent total annual payment of MYR0.125. The dividend has shrunk at around 1.1% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Fima Corporation Berhad's EPS has fallen by approximately 19% 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.

Fima Corporation Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Fima Corporation Berhad that investors should know about before committing capital to this stock. Is Fima Corporation Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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