Paramount Corporation Berhad (KLSE:PARAMON) Has Announced That It Will Be Increasing Its Dividend To RM0.03

Paramount Corporation Berhad (KLSE:PARAMON) has announced that it will be increasing its dividend on the 28th of June to RM0.03, which will be 20% higher than last year. This will take the annual payment from 4.1% to 4.1% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Paramount Corporation Berhad

Paramount Corporation Berhad's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Paramount Corporation Berhad's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 18.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was RM0.071, compared to the most recent full-year payment of RM0.03. This works out to be a decline of approximately 8.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Paramount Corporation Berhad's earnings per share has shrunk at 18% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Paramount Corporation Berhad's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Paramount Corporation Berhad's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Paramount Corporation 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Paramount Corporation Berhad has 3 warning signs (and 2 which are a bit concerning) 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.