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 July. This means the annual payment is 9.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Zhulian Corporation Berhad

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

If the company can't turn things around, EPS could fall by 14.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 490%, which could put the dividend in jeopardy if the company's earnings don't 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. Since 2013, the dividend has gone from MYR0.12 total annually to MYR0.17. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. Over the past five years, it looks as though Zhulian Corporation Berhad's EPS has declined at around 15% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Zhulian Corporation Berhad's Dividend

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 isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Zhulian Corporation Berhad has 4 warning signs (and 2 which are a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.