Singapura Finance (SGX:S23) Is Paying Out A Dividend Of SGD0.03

Singapura Finance Ltd (SGX:S23) has announced that it will pay a dividend of SGD0.03 per share on the 9th of May. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Singapura Finance's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Singapura Finance is earning enough to cover the payment, but then it makes up 202% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 4.0% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 76% in the next 12 months which is on the higher end of the range we would say is sustainable.

Check out our latest analysis for Singapura Finance

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SGD0.05, compared to the most recent full-year payment of SGD0.03. Doing the maths, this is a decline of about 5.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Singapura Finance's earnings per share has fallen at approximately 4.0% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Singapura Finance's Dividend Doesn't Look Sustainable

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Singapura Finance 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.