Kim Loong Resources Berhad's (KLSE:KMLOONG) Dividend Will Be MYR0.05

Kim Loong Resources Berhad's (KLSE:KMLOONG) investors are due to receive a payment of MYR0.05 per share on 15th of November. Based on this payment, the dividend yield on the company's stock will be 8.3%, which is an attractive boost to shareholder returns.

Check out the opportunities and risks within the MY Food industry.

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. The last dividend was quite easily covered by Kim Loong Resources Berhad's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 43.0% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 163%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was MYR0.0533, compared to the most recent full-year payment of MYR0.14. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Kim Loong Resources Berhad has seen EPS rising for the last five years, at 11% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Kim Loong Resources 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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Kim Loong Resources 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.