Zhulian Corporation Berhad's (KLSE:ZHULIAN) Shareholders Will Receive A Smaller Dividend Than Last Year

Zhulian Corporation Berhad's (KLSE:ZHULIAN) dividend is being reduced from last year's payment covering the same period to MYR0.01 on the 4th of June. This means that the dividend yield is 3.7%, which is a bit low when comparing to other companies in the industry.

Our free stock report includes 2 warning signs investors should be aware of before investing in Zhulian Corporation Berhad. Read for free now.

Estimates Indicate Zhulian Corporation Berhad's Could Struggle to Maintain Dividend Payments In The Future

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 142% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 41%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 14.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 174%, which could put the dividend under pressure if earnings don't start to improve.

See our latest analysis for Zhulian Corporation Berhad

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 MYR0.16 in 2015, and the most recent fiscal year payment was MYR0.04. Dividend payments have fallen sharply, down 75% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 14% over the last five years. 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.

Zhulian Corporation Berhad's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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 identified 2 warning signs for Zhulian Corporation Berhad (1 is concerning!) 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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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.