Kim Loong Resources Berhad (KLSE:KMLOONG) Will Pay A Larger Dividend Than Last Year At RM0.04

Kim Loong Resources Berhad's (KLSE:KMLOONG) dividend will be increasing to RM0.04 on 17th of February. This will take the annual payment from 7.0% to 7.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Kim Loong Resources Berhad

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Kim Loong Resources Berhad is earning enough to cover the payment, but the it makes up 145% 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.

Earnings per share is forecast to rise by 8.7% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 98%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was RM0.04 in 2012, and the most recent fiscal year payment was RM0.12. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Kim Loong Resources Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Kim Loong Resources Berhad has been growing its earnings per share at 11% 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.

Our Thoughts On Kim Loong Resources Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Kim Loong Resources Berhad will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Kim Loong Resources Berhad (1 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.