Tat Seng Packaging Group (SGX:T12) Will Pay A Dividend Of SGD0.03

The board of Tat Seng Packaging Group Ltd (SGX:T12) has announced that it will pay a dividend of SGD0.03 per share on the 30th of May. This will take the dividend yield to an attractive 7.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Tat Seng Packaging Group

Tat Seng Packaging Group's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Tat Seng Packaging Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 5.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of SGD0.02 in 2015 to the most recent total annual payment of SGD0.06. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Tat Seng Packaging Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Tat Seng Packaging Group has grown earnings per share at 5.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Tat Seng Packaging Group (of which 1 is a bit concerning!) you should know about. Is Tat Seng Packaging Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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