APAC Realty (SGX:CLN) Will Pay A Larger Dividend Than Last Year At S$0.065

APAC Realty Limited's (SGX:CLN) dividend will be increasing to S$0.065 on 9th of September. This takes the dividend yield from 6.1% to 9.6%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that APAC Realty's stock price has increased by 55% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for APAC Realty

APAC Realty Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, APAC Realty was paying out 72% of earnings, but a comparatively small 58% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 9.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 108%, which probably can't continue putting some pressure on the balance sheet.

APAC Realty's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The first annual payment during the last 3 years was S$0.02 in 2018, and the most recent fiscal year payment was S$0.052. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see APAC Realty has been growing its earnings per share at 22% a year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

We Really Like APAC Realty's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for APAC Realty that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.
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