SLP Resources Berhad (KLSE:SLP) Has Announced A Dividend Of MYR0.01

SLP Resources Berhad (KLSE:SLP) will pay a dividend of MYR0.01 on the 9th of July. This makes the dividend yield 5.3%, which will augment investor returns quite nicely.

Our free stock report includes 2 warning signs investors should be aware of before investing in SLP Resources Berhad. Read for free now.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 16.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 112%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for SLP Resources Berhad

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from MYR0.0167 total annually to MYR0.0475. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, SLP Resources Berhad's earnings per share has shrunk at approximately 9.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help SLP Resources Berhad make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, SLP Resources Berhad has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is SLP Resources Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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