Yeo Hiap Seng (SGX:Y03) Has Announced A Dividend Of SGD0.02

The board of Yeo Hiap Seng Limited (SGX:Y03) has announced that it will pay a dividend on the 21st of June, with investors receiving SGD0.02 per share. The dividend yield is 3.5% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Yeo Hiap Seng

Yeo Hiap Seng Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 182% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 53%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 12.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 213%, which could put the dividend in jeopardy if the company's earnings don't improve.

Yeo Hiap Seng Has A Solid Track Record

The company has an extended history of paying stable dividends. The most recent annual payment of SGD0.02 is about the same as the annual payment 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Yeo Hiap Seng's earnings per share has shrunk at 12% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Yeo Hiap Seng is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Yeo Hiap Seng has 3 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.