Sarawak Plantation Berhad (KLSE:SWKPLNT) Is Paying Out A Dividend Of MYR0.15

The board of Sarawak Plantation Berhad (KLSE:SWKPLNT) has announced that it will pay a dividend of MYR0.15 per share on the 26th of December. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

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Sarawak Plantation Berhad's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Sarawak Plantation Berhad's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 28.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 91%, which is definitely on the higher side.

Check out our latest analysis for Sarawak Plantation Berhad

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. The annual payment during the last 10 years was MYR0.09 in 2015, and the most recent fiscal year payment was MYR0.20. This means that it has been growing its distributions at 8.3% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

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. Sarawak Plantation Berhad has seen EPS rising for the last five years, at 13% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Sarawak Plantation 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 company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Sarawak Plantation Berhad (1 is concerning!) that you should be aware of before investing. Is Sarawak Plantation Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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