Singapura Finance Ltd (SGX:S23) has announced that it will pay a dividend of SGD0.03 per share on the 10th of May. Based on this payment, the dividend yield on the company’s stock will be 4.2%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Singapura Finance
Singapura Finance’s Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Based on the last payment, Singapura Finance was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
EPS is set to fall by 4.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 72%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.
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 2014, the dividend has gone from SGD0.05 total annually to SGD0.03. This works out to be a decline of approximately 5.0% per year over that time. Declining dividends isn’t generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Singapura Finance has seen earnings per share falling at 4.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Our Thoughts On Singapura Finance’s Dividend
Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn’t been great. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 2 warning signs for Singapura Finance that investors should take into consideration. Is Singapura Finance 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.