Stock Analysis

Jardine Matheson Holdings (SGX:J36) Is Increasing Its Dividend To $0.60

SGX:J36
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Jardine Matheson Holdings Limited (SGX:J36) will increase its dividend from last year's comparable payment on the 11th of October to $0.60. This will take the dividend yield to an attractive 4.6%, providing a nice boost to shareholder returns.

See our latest analysis for Jardine Matheson Holdings

Jardine Matheson Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Jardine Matheson Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 32% which is fairly sustainable.

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SGX:J36 Historic Dividend August 2nd 2023

Jardine Matheson Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.35 in 2013, and the most recent fiscal year payment was $2.20. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Jardine Matheson Holdings' EPS has fallen by approximately 25% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Jardine Matheson Holdings' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Jardine Matheson Holdings that investors should take into consideration. Is Jardine Matheson 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.

About SGX:J36

Jardine Matheson Holdings

Through its subsidiaries, operates in motor vehicles and related operations, property investment and development, food retailing, health and beauty, home furnishings, engineering and construction, and transport businesses in China, Southeast Asia, and internationally.

Excellent balance sheet established dividend payer.