SLP Resources Berhad (KLSE:SLP) Is Due To Pay A Dividend Of MYR0.015

SLP Resources Berhad's (KLSE:SLP) investors are due to receive a payment of MYR0.015 per share on 6th of January. This makes the dividend yield 5.1%, which will augment investor returns quite nicely.

Check out the opportunities and risks within the MY Packaging industry.

SLP Resources Berhad's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, SLP Resources Berhad was paying out quite a large proportion of both earnings and cash flow, with the dividend being 235% 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.

The next year is set to see EPS grow by 30.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was MYR0.0167, compared to the most recent full-year payment of MYR0.055. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. SLP Resources Berhad hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for SLP Resources Berhad that investors need to be conscious of moving forward. 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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