Raffles Medical Group (SGX:BSL) Is Reducing Its Dividend To SGD0.024

Raffles Medical Group Ltd (SGX:BSL) has announced that on 23rd of May, it will be paying a dividend ofSGD0.024, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 2.3%, which only provides a modest boost to overall returns.

View our latest analysis for Raffles Medical Group

Raffles Medical Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Raffles Medical Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.8%. If the dividend continues along recent trends, we estimate the payout ratio could be 53%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SGD0.015 in 2014 to the most recent total annual payment of SGD0.024. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 4.0% per year. The company has been growing at a pretty soft 4.0% 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.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 8 analysts we track are forecasting for Raffles Medical Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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