ABR Holdings Limited (SGX:533) has announced that it will pay a dividend of S$0.0025 per share on the 23rd of September. Based on this payment, the dividend yield on the company's stock will be 4.2%, which is an attractive boost to shareholder returns.
ABR Holdings' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, ABR Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
EPS is set to fall by 4.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 66%, which is definitely feasible to continue.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. There hasn't been much of a change in the dividend over the last 10. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. ABR Holdings has seen earnings per share falling at 4.4% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On ABR Holdings' 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. This company is not in the top tier of income providing stocks.
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. To that end, ABR Holdings has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. We have also put together a list of global stocks with a solid dividend.
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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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