Golden Agri-Resources (SGX:E5H) Is Increasing Its Dividend To $0.008

Golden Agri-Resources Ltd (SGX:E5H) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of November to $0.008. This will take the annual payment to 6.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Golden Agri-Resources

Golden Agri-Resources' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Golden Agri-Resources was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 45.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 71%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was $0.0145, compared to the most recent full-year payment of $0.0134. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Golden Agri-Resources has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Golden Agri-Resources Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've identified 3 warning signs for Golden Agri-Resources (1 can't be ignored!) that you should be aware of before investing. Is Golden Agri-Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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