The sustainability of DLady's "high" dividend.

Dutch Lady had paid a high dividend of RM2.60 per share in 2012. This is more than 3-folded as compared to 2011. The sudden jump of dividend, which is much higher than its EPS (RM1.93), had caused suspicion about its sustainability.

For this matter, I think we could get some clues from the company's history -- a giant leap of dividend occurred once in year 2004 too, and here's a summary of what happened then:

• 2004, DLady declared dividends that was 80% higher than its profit, and that dividend was more than 4-folded compared to 2003.
• 2005, the company able to increase the dividend, to a level that was 50% higher than its profit on the same year.
• 2006~2007, same level of dividend, while the company's profit catching up.
• 2008, failed to maintain the dividend rate due to sharp hike of raw material price.
• 2009, restored dividend to previous years' level, and maintain it during 2010~2011.

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During years 2006~2011，the dividend of DLady didn't increase although its profit had experienced a strong growth, hence the accumulation of huge cash in the company. So in 2012, we saw the company able to paid a dividend much higher than its earnings, again.

In the coming years, I'm quite optimistic that DLady will be able to maintain its dividend at current level (RM2.60 per share), due to its potential of continuous profit growth, its strong cashflow, and the huge cash reserves.

So, for the current share price, I'm expecting a net dividend yield of >5%.


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Historical data:

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