Kim Loong Resources Berhad (KLSE:KMLOONG) Is Paying Out A Dividend Of MYR0.05
The board of Kim Loong Resources Berhad (KLSE:KMLOONG) has announced that it will pay a dividend of MYR0.05 per share on the 29th of August. Based on this payment, the dividend yield on the company's stock will be 8.2%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Kim Loong Resources Berhad
Kim Loong Resources Berhad Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Kim Loong Resources Berhad is earning enough to cover the payment, but then it makes up 97% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to fall by 41.1% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 163%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was MYR0.0533, compared to the most recent full-year payment of MYR0.15. This works out to be a compound annual growth rate (CAGR) of approximately 11% 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.
The Dividend Looks Likely To Grow
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. Kim Loong Resources Berhad has impressed us by growing EPS at 10% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kim Loong Resources Berhad's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Kim Loong Resources Berhad you should be aware of, and 1 of them makes us a bit uncomfortable. Is Kim Loong Resources Berhad not quite the opportunity you were looking for? Why not check out our selection of top 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.
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