United Plantations Berhad's (KLSE:UTDPLT) Dividend Will Be Increased To RM0.85

United Plantations Berhad's (KLSE:UTDPLT) dividend will be increasing to RM0.85 on 18th of May. This takes the dividend yield from 6.9% to 6.9%, which shareholders will be pleased with.

View our latest analysis for United Plantations Berhad

United Plantations Berhad Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. At the time of the last dividend payment, United Plantations Berhad was paying out a very large proportion of what it was earning and 708% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 7.7% over the next year if recent trends continue. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 106% over the next year.

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 RM0.45 to RM1.15. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. United Plantations Berhad might have put its house in order since then, but we remain cautious.

We Could See United Plantations Berhad's Dividend Growing

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. It's encouraging to see United Plantations Berhad has been growing its earnings per share at 7.7% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

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 picked out 1 warning sign for United Plantations Berhad that investors should know about before committing capital to this stock. 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.