SLP Resources Berhad (KLSE:SLP) Has Affirmed Its Dividend Of MYR0.0125

The board of SLP Resources Berhad (KLSE:SLP) has announced that it will pay a dividend on the 9th of October, with investors receiving MYR0.0125 per share. Based on this payment, the dividend yield on the company's stock will be 5.5%, which is an attractive boost to shareholder returns.

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SLP Resources Berhad's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 138% of what it was earning and 80% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Over the next year, EPS is forecast to expand by 21.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 122% over the next year.

View our latest analysis for SLP Resources 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 dividend has gone from an annual total of MYR0.0167 in 2015 to the most recent total annual payment of MYR0.0475. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though SLP Resources Berhad's EPS has declined at around 9.5% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

SLP Resources Berhad's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 2 warning signs for SLP Resources Berhad that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.