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

Kim Loong Resources Berhad (KLSE:KMLOONG) will pay a dividend of MYR0.05 on the 29th of August. This makes the dividend yield 8.2%, which will augment investor returns quite nicely.

See 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. Prior to this announcement, Kim Loong Resources Berhad's dividend was only 63% of earnings, however it was paying out 119% of free 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 the path it has been on recently, the payout ratio in 12 months could be 156%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.05 total annually to 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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 company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. To that end, Kim Loong Resources Berhad has 2 warning signs (and 1 which is significant) 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.