Oversea-Chinese Banking (SGX:O39) Is Increasing Its Dividend To SGD0.40

The board of Oversea-Chinese Banking Corporation Limited (SGX:O39) has announced that it will be paying its dividend of SGD0.40 on the 19th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 6.3%, providing a nice boost to shareholder returns.

View our latest analysis for Oversea-Chinese Banking

Oversea-Chinese Banking's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Oversea-Chinese Banking has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 50%, which means that Oversea-Chinese Banking would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 5.6% over the next 3 years. Analysts forecast the future payout ratio could be 51% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was SGD0.32, compared to the most recent full-year payment of SGD0.80. This means that it has been growing its distributions at 9.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Oversea-Chinese Banking Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Oversea-Chinese Banking has impressed us by growing EPS at 6.0% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Oversea-Chinese Banking that investors need to be conscious of moving forward. 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.