Zhulian Corporation Berhad (KLSE:ZHULIAN) Has Announced A Dividend Of RM0.03

The board of Zhulian Corporation Berhad (KLSE:ZHULIAN) has announced that it will pay a dividend of RM0.03 per share on the 1st of December. This makes the dividend yield 8.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Zhulian Corporation Berhad

Zhulian Corporation Berhad Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 119% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 59%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share could rise by 6.6% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 173%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from RM0.12 to RM0.17. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Zhulian Corporation Berhad has grown earnings per share at 6.6% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Zhulian Corporation Berhad's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Zhulian Corporation Berhad is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Zhulian Corporation Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.