Kotra Industries Berhad (KLSE:KOTRA) Has Announced A Dividend Of MYR0.125

Kotra Industries Berhad (KLSE:KOTRA) will pay a dividend of MYR0.125 on the 21st of March. This will take the annual payment to 5.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Kotra Industries Berhad

Kotra Industries Berhad's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. At the time of the last dividend payment, Kotra Industries Berhad was paying out a very large proportion of what it was earning and 109% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 23.3%. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

Kotra Industries Berhad's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of MYR0.04 in 2017 to the most recent total annual payment of MYR0.255. This means that it has been growing its distributions at 30% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. It's encouraging to see that Kotra Industries Berhad has been growing its earnings per share at 21% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Kotra Industries Berhad is not retaining those earnings to reinvest in growth.

Our Thoughts On Kotra Industries Berhad's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Kotra Industries Berhad is earning enough to cover the payments, the cash flows are lacking. We don't think Kotra Industries Berhad is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Kotra Industries Berhad that you should be aware of before investing. 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.