Sheng Siong Group (SGX:OV8) Has Affirmed Its Dividend Of SGD0.032

Sheng Siong Group Ltd (SGX:OV8) has announced that it will pay a dividend of SGD0.032 per share on the 29th of August. This payment means the dividend yield will be 3.1%, which is below the average for the industry.

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Sheng Siong Group's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Sheng Siong Group 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.

Over the next year, EPS is forecast to expand by 20.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 62% by next year, which is in a pretty sustainable range.

See our latest analysis for Sheng Siong Group

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 dividend has gone from an annual total of SGD0.03 in 2015 to the most recent total annual payment of SGD0.064. This implies that the company grew its distributions at a yearly rate of about 7.9% 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.

The Dividend's Growth Prospects Are Limited

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 4.4% per annum over the last five years, which admittedly is a bit slow. Sheng Siong Group is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we think Sheng Siong Group is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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.

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. For example, we've picked out 1 warning sign for Sheng Siong Group that investors should know about before committing capital to this stock. Is Sheng Siong Group 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.