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

Kotra Industries Berhad's (KLSE:KOTRA) investors are due to receive a payment of MYR0.13 per share on 10th of October. The yield is still above the industry average at 5.9%.

View our latest analysis for Kotra Industries Berhad

Kotra Industries Berhad's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Kotra Industries Berhad was paying out a very large proportion of what it was earning and 237% 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 29.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 86%, which is on the higher side, but certainly still feasible.

Kotra Industries Berhad's Dividend Has Lacked Consistency

Looking back, Kotra Industries Berhad's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was MYR0.04, compared to the most recent full-year payment of MYR0.255. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Could Be Constrained

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. We are encouraged to see that Kotra Industries Berhad has grown earnings per share at 14% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Kotra Industries Berhad's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

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 example, we've picked out 1 warning sign for Kotra Industries Berhad that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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