Batu Kawan Berhad (KLSE:BKAWAN) Has Announced A Dividend Of MYR0.20

Batu Kawan Berhad (KLSE:BKAWAN) has announced that it will pay a dividend of MYR0.20 per share on the 31st of July. This means the dividend yield will be fairly typical at 3.2%.

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Batu Kawan Berhad's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, earnings per share could rise by 3.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 74% by next year, which is in a pretty sustainable range.

View our latest analysis for Batu Kawan Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The payments haven't really changed that much since 10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Batu Kawan Berhad May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.8% per annum over the last five years, which admittedly is a bit slow. Batu Kawan Berhad's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Batu Kawan Berhad's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Batu Kawan Berhad is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Batu Kawan Berhad you should be aware of, and 2 of them are a bit concerning. 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.