Zhulian Corporation Berhad (KLSE:ZHULIAN) Is Due To Pay A Dividend Of MYR0.03

Zhulian Corporation Berhad's (KLSE:ZHULIAN) investors are due to receive a payment of MYR0.03 per share on 7th of December. This means the annual payment is 8.9% of the current stock price, which is above the average for the industry.

Check out the opportunities and risks within the MY Luxury industry.

Zhulian Corporation Berhad Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

If the company can't turn things around, EPS could fall by 4.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 183%, which is definitely a bit high to be sustainable going forward.

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 MYR0.12 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. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Zhulian Corporation Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Zhulian Corporation Berhad's EPS has declined at around 4.0% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Zhulian Corporation Berhad's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Zhulian Corporation Berhad make more consistent payments in the future. 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. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. Case in point: We've spotted 3 warning signs for Zhulian Corporation Berhad (of which 2 don't sit too well with us!) you should know about. Is Zhulian Corporation Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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