Kim Loong Resources Berhad (KLSE:KMLOONG) Has Announced A Dividend Of MYR0.05

Kim Loong Resources Berhad's (KLSE:KMLOONG) investors are due to receive a payment of MYR0.05 per share on 29th of August. The dividend yield will be 8.5% based on this payment which is still above the industry average.

View our latest analysis for Kim Loong Resources Berhad

Kim Loong Resources Berhad Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Kim Loong Resources Berhad is earning enough to cover the payment, but then it makes up 119% of 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.

EPS is set to fall by 34.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 155%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was MYR0.05, compared to the most recent full-year payment of MYR0.15. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See Kim Loong Resources Berhad's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Kim Loong Resources Berhad has grown earnings per share at 9.9% 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 Kim Loong Resources Berhad's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kim Loong Resources Berhad's payments, as there could be some issues with sustaining them into the future. While Kim Loong Resources Berhad is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for Kim Loong Resources Berhad you should be aware of, and 1 of them is a bit unpleasant. 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.