Deleum Berhad's (KLSE:DELEUM) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Deleum Berhad (KLSE:DELEUM) has announced that the dividend on 28th of March will be increased to MYR0.053, which will be 43% higher than last year's payment of MYR0.037 which covered the same period. This takes the dividend yield to 5.4%, which shareholders will be pleased with.

See our latest analysis for Deleum Berhad

Deleum Berhad's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Deleum Berhad's dividend was only 43% of earnings, however it was paying out 197% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 17.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was MYR0.135, compared to the most recent full-year payment of MYR0.077. The dividend has shrunk at around 5.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Deleum Berhad has impressed us by growing EPS at 17% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Deleum Berhad's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Deleum Berhad's payments are rock solid. While Deleum Berhad is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Deleum Berhad has 2 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.