Kim Loong Resources Berhad (KLSE:KMLOONG) Has Announced That It Will Be Increasing Its Dividend To RM0.05

Kim Loong Resources Berhad (KLSE:KMLOONG) has announced that it will be increasing its dividend on the 29th of August to RM0.05. This will take the dividend yield from 7.3% to 7.3%, providing a nice boost to shareholder returns.

See our latest analysis for Kim Loong Resources Berhad

Kim Loong Resources 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. Based on the last dividend, Kim Loong Resources Berhad is earning enough to cover the payment, but the it makes up 107% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to grow by 32.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from RM0.04 to RM0.14. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Kim Loong Resources Berhad has been growing its earnings per share at 13% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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 3 warning signs for Kim Loong Resources Berhad you should be aware of, and 1 of them can't be ignored. 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.