Sarawak Plantation Berhad's (KLSE:SWKPLNT) Upcoming Dividend Will Be Larger Than Last Year's

Sarawak Plantation Berhad (KLSE:SWKPLNT) will increase its dividend on the 25th of January to RM0.10. This takes the dividend yield to 6.2%, which shareholders will be pleased with.

Check out our latest analysis for Sarawak Plantation Berhad

Sarawak Plantation Berhad's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Sarawak Plantation Berhad's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 29.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 58%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from RM0.075 in 2011 to the most recent annual payment of RM0.20. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Sarawak Plantation Berhad has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. We are encouraged to see that Sarawak Plantation Berhad has grown earnings per share at 43% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Sarawak Plantation Berhad's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Sarawak Plantation Berhad you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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