Selangor Dredging Berhad (KLSE:SDRED) Is Paying Out A Dividend Of MYR0.03

The board of Selangor Dredging Berhad (KLSE:SDRED) has announced that it will pay a dividend on the 14th of October, with investors receiving MYR0.03 per share. The dividend yield will be 5.4% based on this payment which is still above the industry average.

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Selangor Dredging Berhad's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, earnings per share could rise by 61.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 73% which brings it into quite a comfortable range.

See our latest analysis for Selangor Dredging Berhad

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. There hasn't been much of a change in the dividend over the last 10 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Selangor Dredging Berhad's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Selangor Dredging Berhad has impressed us by growing EPS at 62% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

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. Strong earnings growth means Selangor Dredging Berhad has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Selangor Dredging Berhad is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Selangor Dredging Berhad has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.