Singapore Technologies Engineering's (SGX:S63) Dividend Will Be S$0.10

The board of Singapore Technologies Engineering Ltd (SGX:S63) has announced that it will pay a dividend of S$0.10 per share on the 10th of May. The dividend yield will be 4.0% based on this payment which is still above the industry average.

View our latest analysis for Singapore Technologies Engineering

Singapore Technologies Engineering's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Singapore Technologies Engineering was paying out 82% of earnings, but a comparatively small 73% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to grow by 3.1% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

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 2012, the dividend has gone from S$0.15 to S$0.16. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. Slow growth and a high payout ratio could mean that Singapore Technologies Engineering has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Singapore Technologies Engineering's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Singapore Technologies Engineering that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.