Batu Kawan Berhad's (KLSE:BKAWAN) Dividend Will Be MYR0.90

Batu Kawan Berhad (KLSE:BKAWAN) has announced that it will pay a dividend of MYR0.90 per share on the 2nd of March. This means the dividend yield will be fairly typical at 4.9%.

Check out our latest analysis for Batu Kawan Berhad

Batu Kawan Berhad's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Batu Kawan Berhad was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 15.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

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 an annual total of MYR0.95 in 2013 to the most recent total annual payment of MYR1.10. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Batu Kawan Berhad has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Batu Kawan 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Batu Kawan Berhad that investors should know about before committing capital to this stock. Is Batu Kawan Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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