Zhulian Corporation Berhad (KLSE:ZHULIAN) Will Pay 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.

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. Before making this announcement, the company's dividend was much higher than its earnings. 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 0.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 170%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from MYR0.12 total annually to MYR0.17. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Zhulian Corporation Berhad hasn't seen much change in its earnings per share over the last five years.

Zhulian Corporation Berhad's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Zhulian Corporation Berhad (2 are potentially serious!) that you should be aware of before investing. 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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