Kuala Lumpur Kepong Berhad (KLSE:KLK) Will Pay A Dividend Of MYR0.80

Kuala Lumpur Kepong Berhad's (KLSE:KLK) investors are due to receive a payment of MYR0.80 per share on 28th of February. This makes the dividend yield 4.8%, which will augment investor returns quite nicely.

See our latest analysis for Kuala Lumpur Kepong Berhad

Kuala Lumpur Kepong Berhad's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. 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.

Looking forward, earnings per share is forecast to fall by 31.0% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 80% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from MYR0.85 total annually to MYR1.00. This means that it has been growing its distributions at 1.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Kuala Lumpur Kepong Berhad has seen EPS rising for the last five years, at 16% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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 company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Kuala Lumpur Kepong Berhad has 3 warning signs (and 1 which makes us a bit uncomfortable) 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.