Singapore Exchange's (SGX:S68) Dividend Will Be Increased To SGD0.085

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. Based on this payment, the dividend yield for the company will be 3.5%, which is fairly typical for the industry.

View our latest analysis for Singapore Exchange

Singapore Exchange's Earnings Easily Cover The Distributions

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. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to fall by 1.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 63%, which is comfortable for the company to continue in the future.

Singapore Exchange Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from SGD0.28 total annually to SGD0.34. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

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. We are encouraged to see that Singapore Exchange has grown earnings per share at 9.5% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Singapore Exchange's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 1 warning sign for Singapore Exchange that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.