Riverview Rubber Estates Berhad (KLSE:RVIEW) Is Increasing Its Dividend To RM0.20

The board of Riverview Rubber Estates, Berhad (KLSE:RVIEW) has announced that the dividend on 29th of July will be increased to RM0.20, which will be 400% higher than last year. This will take the dividend yield from 6.5% to 11%, providing a nice boost to shareholder returns.

Check out our latest analysis for Riverview Rubber Estates Berhad

Riverview Rubber Estates Berhad's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Riverview Rubber Estates Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 8.4% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 92%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

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 dividend has gone from RM0.15 to RM0.24. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Riverview Rubber Estates Berhad Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Riverview Rubber Estates Berhad has seen EPS rising for the last five years, at 8.4% per annum. Riverview Rubber Estates Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Riverview Rubber Estates Berhad Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Riverview Rubber Estates Berhad is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Riverview Rubber Estates Berhad that investors should take into consideration. 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.