China Aviation Oil (Singapore) (SGX:G92) Will Pay A Larger Dividend Than Last Year At $0.0505

China Aviation Oil (Singapore) Corporation Ltd's (SGX:G92) periodic dividend will be increasing on the 27th of May to $0.0505, with investors receiving 216% more than last year's $0.016. Even though the dividend went up, the yield is still quite low at only 2.9%.

Check out our latest analysis for China Aviation Oil (Singapore)

China Aviation Oil (Singapore)'s Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, China Aviation Oil (Singapore)'s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 43.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.013 in 2014 to the most recent total annual payment of $0.0199. This means that it has been growing its distributions at 4.3% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, China Aviation Oil (Singapore)'s earnings per share has shrunk at approximately 8.9% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On China Aviation Oil (Singapore)'s Dividend

In summary, while it's always good to see the dividend being raised, we don't think China Aviation Oil (Singapore)'s payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think China Aviation Oil (Singapore) is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for China Aviation Oil (Singapore) that investors should know about before committing capital to this stock. Is China Aviation Oil (Singapore) 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.