Ascendas India Trust's (SGX:CY6U) Upcoming Dividend Will Be Larger Than Last Year's

The board of Ascendas India Trust (SGX:CY6U) has announced that it will be increasing its dividend by 1.9% on the 30th of August to SGD0.0428, up from last year's comparable payment of SGD0.042. This makes the dividend yield 6.3%, which is above the industry average.

Check out our latest analysis for Ascendas India Trust

Ascendas India Trust's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Ascendas India Trust was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 23.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 70%, 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 annual payment during the last 10 years was SGD0.0608 in 2012, and the most recent fiscal year payment was SGD0.078. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

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. Unfortunately, Ascendas India Trust's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Ascendas India Trust is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. To that end, Ascendas India Trust has 3 warning signs (and 1 which is concerning) we think you should know about. Is Ascendas India Trust not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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