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

Yeo Hiap Seng Limited (SGX:Y03) has announced that it will pay a dividend of SGD0.02 per share on the 20th of June. The dividend yield is 3.4% based on this payment, which is a little bit low compared to the other companies in the industry.

Yeo Hiap Seng's Projections Indicate Future Payments May Be Unsustainable

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, the company's dividend was higher than its profits, and made up 89% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

If the company can't turn things around, EPS could fall by 18.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 223%, which could put the dividend under pressure if earnings don't start to improve.

See our latest analysis for Yeo Hiap Seng

Yeo Hiap Seng Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of SGD0.02 was flat on the annual payment from10 years ago. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Yeo Hiap Seng's EPS has declined at around 18% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yeo Hiap Seng's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Yeo Hiap Seng that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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