Kuala Lumpur Kepong Berhad (KLSE:KLK) Has Affirmed Its Dividend Of MYR0.80

The board of Kuala Lumpur Kepong Berhad (KLSE:KLK) has announced that it will pay a dividend of MYR0.80 per share on the 28th of February. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

Check out our latest analysis for Kuala Lumpur Kepong Berhad

Kuala Lumpur Kepong Berhad's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Kuala Lumpur Kepong Berhad's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to fall by 30.9%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 81%, which is definitely on the higher side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.65 in 2012, and the most recent fiscal year payment was MYR1.00. This means that it has been growing its distributions at 4.4% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Kuala Lumpur Kepong Berhad has been growing its earnings per share at 16% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Kuala Lumpur Kepong Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kuala Lumpur Kepong Berhad's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Kuala Lumpur Kepong Berhad has been making. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for Kuala Lumpur Kepong Berhad (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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