Stock Analysis

Sarawak Oil Palms Berhad (KLSE:SOP) Has Re-Affirmed Its Dividend Of RM0.06

KLSE:SOP
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Sarawak Oil Palms Berhad's (KLSE:SOP) investors are due to receive a payment of RM0.06 per share on 15th of July. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Sarawak Oil Palms Berhad's stock price has increased by 65% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Sarawak Oil Palms Berhad

Sarawak Oil Palms Berhad's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Sarawak Oil Palms Berhad's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 23.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
KLSE:SOP Historic Dividend May 6th 2022

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.05 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 9.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Sarawak Oil Palms Berhad has grown earnings per share at 26% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Sarawak Oil Palms Berhad Looks Like A Great Dividend Stock

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Sarawak Oil Palms Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Sarawak Oil Palms Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.