Riverview Rubber Estates Berhad's (KLSE:RVIEW) Dividend Will Be MYR0.05

The board of Riverview Rubber Estates, Berhad (KLSE:RVIEW) has announced that it will pay a dividend on the 7th of February, with investors receiving MYR0.05 per share. Based on this payment, the dividend yield will be 3.3%, which is fairly typical for the industry.

View our latest analysis for Riverview Rubber Estates Berhad

Riverview Rubber Estates Berhad's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share could rise by 42.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from MYR0.20 total annually to MYR0.10. The dividend has shrunk at around 6.7% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Riverview Rubber Estates Berhad's Dividend Might Lack Growth

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. We are encouraged to see that Riverview Rubber Estates Berhad has grown earnings per share at 42% per year over the past five years. Although earnings per share is up nicely Riverview Rubber Estates Berhad is paying out 112% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Riverview Rubber Estates Berhad has 2 warning signs (and 1 which is potentially serious) 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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