China Aviation Oil (Singapore)'s (SGX:G92) Upcoming Dividend Will Be Larger Than Last Year's

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 Earnings Easily Cover The Distributions

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. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 43.2% over the next year. 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's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was $0.013, compared to the most recent full-year payment of $0.02. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. China Aviation Oil (Singapore) has seen earnings per share falling at 8.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

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

Overall, we always like to see the dividend being raised, but we don't think China Aviation Oil (Singapore) will make a great income stock. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 China Aviation Oil (Singapore) that investors need to be conscious of moving forward. 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.