Kotra Industries Berhad (KLSE:KOTRA) Has Announced A Dividend Of MYR0.13

The board of Kotra Industries Berhad (KLSE:KOTRA) has announced that it will pay a dividend of MYR0.13 per share on the 24th of October. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

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Kotra Industries Berhad's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Kotra Industries Berhad's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 176% 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.

EPS is set to grow by 24.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

See our latest analysis for Kotra Industries Berhad

Kotra Industries Berhad's Dividend Has Lacked Consistency

Looking back, Kotra Industries Berhad's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was MYR0.04 in 2016, and the most recent fiscal year payment was MYR0.255. This means that it has been growing its distributions at 23% per annum 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.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Kotra Industries Berhad has been growing its earnings per share at 7.0% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

The Dividend Could Prove To Be Unreliable

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 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Kotra Industries Berhad that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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