Haw Par (SGX:H02) Will Pay A Dividend Of S$0.15

The board of Haw Par Corporation Limited (SGX:H02) has announced that it will pay a dividend of S$0.15 per share on the 26th of May. This means the dividend yield will be fairly typical at 2.6%.

Check out our latest analysis for Haw Par

Haw Par's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last dividend, Haw Par is earning enough to cover the payment, but the it makes up 459% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 2.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 67%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was S$0.18 in 2012, and the most recent fiscal year payment was S$0.30. This means that it has been growing its distributions at 5.1% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Haw Par might have put its house in order since then, but we remain cautious.

Haw Par May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Haw Par has seen earnings per share falling at 2.7% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Haw Par (of which 1 is a bit concerning!) 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.