Singapore Exchange (SGX:S68) Is Paying Out A Dividend Of SGD0.08

The board of Singapore Exchange Limited (SGX:S68) has announced that it will pay a dividend on the 21st of October, with investors receiving SGD0.08 per share. This means the dividend yield will be fairly typical at 3.2%.

View our latest analysis for Singapore Exchange

Singapore Exchange's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Singapore Exchange's dividend made up quite a large proportion of earnings but only 63% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 16.2% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 66% which brings it into quite a comfortable range.

Singapore Exchange Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was SGD0.27 in 2012, and the most recent fiscal year payment was SGD0.32. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Singapore Exchange's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Singapore Exchange has impressed us by growing EPS at 5.9% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Singapore Exchange analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Singapore Exchange 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.