First Resources' (SGX:EB5) Upcoming Dividend Will Be Larger Than Last Year's

First Resources Limited (SGX:EB5) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of May to $0.12. This makes the dividend yield about the same as the industry average at 4.6%.

Check out our latest analysis for First Resources

First Resources' Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, First Resources' dividend was comfortably covered by both cash flow and earnings. 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 5.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from $0.0312 total annually to $0.0528. This means that it has been growing its distributions at 5.4% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that First Resources has grown earnings per share at 19% per year over the past five years. First Resources definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like First Resources' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for First Resources (of which 1 is concerning!) you should know about. Is First Resources 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.