Delfi (SGX:P34) Is Increasing Its Dividend To S$0.021

By
Simply Wall St
Published
April 17, 2022
SGX:P34
Source: Shutterstock

Delfi Limited's (SGX:P34) dividend will be increasing to S$0.021 on 13th of May. This takes the dividend yield from 3.9% to 4.6%, which shareholders will be pleased with.

Check out our latest analysis for Delfi

Delfi's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Delfi was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 8.0% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 89% in the next 12 months, which is on the higher end of the range we would say is sustainable.

historic-dividend
SGX:P34 Historic Dividend April 17th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was US$0.037, compared to the most recent full-year payment of US$0.024. This works out to be a decline of approximately 4.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

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. However, Delfi has only grown its earnings per share at 2.3% per annum over the past five years. The company has been growing at a pretty soft 2.3% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Delfi's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Delfi that investors should know about before committing capital to this stock. Is Delfi not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.