Bumitama Agri (SGX:P8Z) Is Paying Out A Larger Dividend Than Last Year

By
Simply Wall St
Published
August 15, 2021
SGX:P8Z
Source: Shutterstock

The board of Bumitama Agri Ltd. (SGX:P8Z) has announced that it will be increasing its dividend on the 17th of September to S$0.0045. This will take the dividend yield from 5.2% to 5.3%, providing a nice boost to shareholder returns.

See our latest analysis for Bumitama Agri

Bumitama Agri's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Bumitama Agri's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 6.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 0.004%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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SGX:P8Z Historic Dividend August 16th 2021

Bumitama Agri's Dividend Has Lacked Consistency

Looking back, Bumitama Agri's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from Rp92.60 to Rp254. This means that it has been growing its distributions at 13% per annum over that time. Bumitama Agri has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Bumitama Agri 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. Bumitama Agri has seen EPS rising for the last five years, at 9.7% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Bumitama Agri Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Bumitama Agri that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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