Singapore Exchange's (SGX:S68) Dividend Will Be SGD0.08

Singapore Exchange Limited (SGX:S68) will pay a dividend of SGD0.08 on the 21st of October. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

Check out our latest analysis for Singapore Exchange

Singapore Exchange's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Singapore Exchange's dividend made up quite a large proportion of earnings but only 63% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 17.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Singapore Exchange Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of SGD0.27 in 2012 to the most recent total annual payment of SGD0.32. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Singapore Exchange Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Singapore Exchange has seen EPS rising for the last five years, at 5.9% per annum. 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 15 analysts we track are forecasting for Singapore Exchange for free with public analyst estimates for the company. 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.