Tai Sin Electric (SGX:500) Has Announced That It Will Be Increasing Its Dividend To S$0.015

The board of Tai Sin Electric Limited (SGX:500) has announced that it will be increasing its dividend on the 15th of November to S$0.015. This will take the annual payment to 5.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Tai Sin Electric

Tai Sin Electric's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Tai Sin Electric 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.

Unless the company can turn things around, EPS could fall by 6.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is definitely feasible to continue.

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 2011, the dividend has gone from S$0.016 to S$0.03. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Tai Sin Electric's earnings per share has shrunk at approximately 6.7% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Tai Sin Electric's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Tai Sin Electric has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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