SLP Resources Berhad (KLSE:SLP) Is Paying Out Less In Dividends Than Last Year

The board of SLP Resources Berhad (KLSE:SLP) has announced it will be reducing its dividend by 17% from last year's payment of MYR0.015 on the 5th of October, with shareholders receiving MYR0.0125. However, the dividend yield of 6.4% is still a decent boost to shareholder returns.

Check out our latest analysis for SLP Resources Berhad

SLP Resources 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. Prior to this announcement, the company was paying out 121% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 55.9% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 87% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from MYR0.0167 total annually to MYR0.055. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. SLP Resources Berhad has seen earnings per share falling at 8.3% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

SLP Resources Berhad's Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We don't think that this is a great candidate to be an income stock.

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. For example, we've identified 4 warning signs for SLP Resources Berhad (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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