The board of Zhulian Corporation Berhad (KLSE:ZHULIAN) has announced that it will pay a dividend on the 5th of June, with investors receiving MYR0.03 per share. The dividend yield will be 9.1% based on this payment which is still above the industry average.
Check out our latest analysis for Zhulian Corporation Berhad
Zhulian Corporation Berhad Doesn't Earn Enough To Cover Its Payments
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
EPS is set to fall by 11.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 244%, 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 2014, the annual payment back then was MYR0.12, compared to the most recent full-year payment of MYR0.13. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 12% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Zhulian Corporation Berhad's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Zhulian Corporation Berhad make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Zhulian Corporation Berhad that you should be aware of before investing. Is Zhulian Corporation Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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