Oversea-Chinese Banking's (SGX:O39) Dividend Will Be Increased To SGD0.42

Oversea-Chinese Banking Corporation Limited (SGX:O39) will increase its dividend from last year's comparable payment on the 21st of May to SGD0.42. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Oversea-Chinese Banking

Oversea-Chinese Banking's Payment Expected To Have Solid Earnings Coverage

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

Oversea-Chinese Banking has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 53%, 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 6.1% over the next 3 years. Analysts estimate the future payout ratio will be 54% 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 annual payment during the last 10 years was SGD0.34 in 2014, and the most recent fiscal year payment was SGD0.84. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Oversea-Chinese Banking's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Oversea-Chinese Banking has seen EPS rising for the last five years, at 8.0% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Oversea-Chinese Banking's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Oversea-Chinese Banking that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.