SLP Resources Berhad (KLSE:SLP) Is Due To Pay A Dividend Of RM0.015

The board of SLP Resources Berhad (KLSE:SLP) has announced that it will pay a dividend of RM0.015 per share on the 7th of October. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

View our latest analysis for SLP Resources Berhad

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. Prior to this announcement, SLP Resources Berhad's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 140% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 15.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 92%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.017 in 2011, and the most recent fiscal year payment was RM0.055. This means that it has been growing its distributions at 13% per annum 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, SLP Resources Berhad's earnings per share has shrunk at approximately 8.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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. We don't think SLP Resources Berhad is a great stock to add to your portfolio if income is your focus.

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. 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. We have also put together a list of global stocks with a solid dividend.

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