Zhulian Corporation Berhad (KLSE:ZHULIAN) Has Announced A Dividend Of MYR0.03

The board of Zhulian Corporation Berhad (KLSE:ZHULIAN) has announced that it will pay a dividend of MYR0.03 per share on the 7th of September. This makes the dividend yield 8.7%, 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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 106% of what it was earning. 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 0.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 170%, which could put the dividend under pressure if earnings don't start to improve.

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. The annual payment during the last 10 years was MYR0.12 in 2012, and the most recent fiscal year payment was MYR0.17. This means that it has been growing its distributions at 3.5% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Zhulian Corporation Berhad May Find It Hard To Grow The Dividend

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. Although it's important to note that Zhulian Corporation Berhad's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Zhulian Corporation Berhad's Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Zhulian Corporation Berhad (2 make us uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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