The board of Singapura Finance Ltd (SGX:S23) has announced that it will pay a dividend on the 10th of May, with investors receiving SGD0.03 per share. The dividend yield will be 4.2% based on this payment which is still above the industry average.
View our latest analysis for Singapura Finance
Singapura Finance's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Singapura Finance's 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 72%, which is definitely feasible to continue.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SGD0.05 in 2014, and the most recent fiscal year payment was SGD0.03. The dividend has shrunk at around 5.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Singapura Finance May Find It Hard To Grow The Dividend
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. Over the past five years, it looks as though Singapura Finance's EPS has declined at around 4.4% a year. 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 good to see that the dividend hasn't been cut, we are a bit cautious about Singapura Finance's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Singapura Finance that investors should take into consideration. Is Singapura Finance 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:S23
Excellent balance sheet slight.
