Delfi (SGX:P34) Will Pay A Larger Dividend Than Last Year At S$0.021

Delfi Limited (SGX:P34) has announced that it will be increasing its dividend on the 13th of May to S$0.021. This takes the dividend yield from 4.1% to 4.9%, which shareholders will be pleased with.

Check out our latest analysis for Delfi

Delfi's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Delfi's dividend was comfortably covered by both cash flow and 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 fall by 10.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 88%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from US$0.034 to US$0.024. This works out to be a decline of approximately 3.7% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

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. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. 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

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Delfi that investors should take into consideration. Is Delfi 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.