Dutch Lady Milk Industries Berhad (KLSE:DLADY) Has Announced A Dividend Of MYR0.25

Dutch Lady Milk Industries Berhad (KLSE:DLADY) will pay a dividend of MYR0.25 on the 13th of December. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Dutch Lady Milk Industries Berhad

Dutch Lady Milk Industries Berhad's Future Dividend Projections Seem Positive

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Dutch Lady Milk Industries Berhad's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 71.6% over the next year. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MYR2.60 in 2014, and the most recent fiscal year payment was MYR0.50. This works out to a decline of approximately 81% 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's Growth Prospects Are Limited

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. In the last five years, Dutch Lady Milk Industries Berhad's earnings per share has shrunk at approximately 3.6% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Dutch Lady Milk Industries Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Dutch Lady Milk Industries Berhad that you should be aware of before investing. 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.