GuocoLand Limited (SGX:F17) will pay a dividend of SGD0.06 on the 15th of November. This payment means that the dividend yield will be 3.7%, which is around the industry average.
Check out the opportunities and risks within the SG Real Estate industry.
GuocoLand's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, GuocoLand's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to fall by 58.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.
GuocoLand Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was SGD0.05 in 2012, and the most recent fiscal year payment was SGD0.06. This implies that the company grew its distributions at a yearly rate of about 1.8% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
GuocoLand May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that GuocoLand's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, GuocoLand has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On GuocoLand's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about GuocoLand's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for GuocoLand you should be aware of, and 2 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About SGX:F17
GuocoLand
An investment holding company, engages in the property investment and development business.
Established dividend payer slight.
