DBS Group Holdings (SGX:D05) Has Announced That It Will Be Increasing Its Dividend To SGD0.92

DBS Group Holdings Ltd (SGX:D05) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of April to SGD0.92. The payment will take the dividend yield to 4.8%, which is in line with the average for the industry.

Check out our latest analysis for DBS Group Holdings

DBS Group Holdings' Dividend Forecasted To Be Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, DBS Group Holdings has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but DBS Group Holdings' payout ratio of 47% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 30.8%. Analysts estimate the future payout ratio will be 49% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The dividend has gone from an annual total of SGD0.56 in 2013 to the most recent total annual payment of SGD1.68. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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. DBS Group Holdings has seen EPS rising for the last five years, at 14% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like DBS Group Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for DBS Group Holdings (1 is a bit unpleasant!) that you should be aware of before investing. Is DBS Group Holdings 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.