First Resources' (SGX:EB5) Shareholders Will Receive A Bigger Dividend Than Last Year

First Resources Limited's (SGX:EB5) dividend will be increasing to S$0.051 on 19th of May. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that First Resources' stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for First Resources

First Resources' Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by First Resources' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 45.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The dividend has gone from US$0.022 in 2012 to the most recent annual payment of US$0.046. This means that it has been growing its distributions at 7.7% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

First Resources Could Grow Its Dividend

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. We are encouraged to see that First Resources has grown earnings per share at 5.2% 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.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for First Resources that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.