Kuala Lumpur Kepong Berhad (KLSE:KLK) Has Affirmed Its Dividend Of MYR0.20

The board of Kuala Lumpur Kepong Berhad (KLSE:KLK) has announced that it will pay a dividend on the 1st of August, with investors receiving MYR0.20 per share. Based on this payment, the dividend yield on the company's stock will be 4.6%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Kuala Lumpur Kepong Berhad

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Kuala Lumpur Kepong Berhad's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 11.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 77%, which is definitely on the higher side.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of MYR0.65 in 2013 to the most recent total annual payment of MYR1.00. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kuala Lumpur Kepong Berhad has seen EPS rising for the last five years, at 19% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Kuala Lumpur Kepong Berhad's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Kuala Lumpur Kepong Berhad (of which 1 can'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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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.