Yeo Hiap Seng (SGX:Y03) Is Due To Pay A Dividend Of SGD0.02

The board of Yeo Hiap Seng Limited (SGX:Y03) has announced that it will pay a dividend on the 20th of June, with investors receiving SGD0.02 per share. This means the annual payment will be 3.6% of the current stock price, which is lower than the industry average.

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Estimates Indicate Yeo Hiap Seng's Could Struggle to Maintain Dividend Payments In The Future

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, the company's dividend was higher than its profits, and made up 89% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

If the company can't turn things around, EPS could fall by 18.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 223%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for Yeo Hiap Seng

Yeo Hiap Seng Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. There hasn't been much of a change in the dividend over the last 10 years. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Yeo Hiap Seng's earnings per share has shrunk at 18% a year over the past five years. 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.

Yeo Hiap Seng's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 don't think Yeo Hiap Seng is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 1 warning sign for Yeo Hiap Seng that you should be aware of before investing. Is Yeo Hiap Seng 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.