Singapore Exchange (SGX:S68) Is Paying Out A Larger Dividend Than Last Year

The board of Singapore Exchange Limited (SGX:S68) has announced that it will be paying its dividend of SGD0.085 on the 20th of October, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.6%.

View our latest analysis for Singapore Exchange

Singapore Exchange's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite comfortably covered by Singapore Exchange's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to fall by 1.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 63%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Singapore Exchange Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of SGD0.28 in 2013 to the most recent total annual payment of SGD0.34. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

We Could See Singapore Exchange's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Singapore Exchange has been growing its earnings per share at 9.5% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Singapore Exchange that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.