Thakral (SGX:AWI) Has Announced A Dividend Of SGD0.02

Thakral Corporation Ltd (SGX:AWI) has announced that it will pay a dividend of SGD0.02 per share on the 21st of May. This means that the annual payment will be 6.6% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Thakral

Thakral's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Thakral's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 2.1% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 68%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was SGD0.02, compared to the most recent full-year payment of SGD0.04. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Thakral might have put its house in order since then, but we remain cautious.

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. It's not great to see that Thakral's earnings per share has fallen at approximately 2.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Thakral's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 4 warning signs for Thakral that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.