YHI International (SGX:BPF) Has Announced That Its Dividend Will Be Reduced To SGD0.023

YHI International Limited (SGX:BPF) is reducing its dividend from last year's comparable payment to SGD0.023 on the 16th of May. Based on this payment, the dividend yield will be 5.0%, which is lower than the average for the industry.

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YHI International's Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, YHI International's dividend was only 70% of earnings, however it was paying out 103% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 5.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 84%, which is definitely on the higher side.

See our latest analysis for YHI International

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.012 in 2015 to the most recent total annual payment of SGD0.023. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year 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. YHI International might have put its house in order since then, but we remain cautious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though YHI International's EPS has declined at around 5.8% a year. 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

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While YHI International is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, YHI International has 3 warning signs (and 1 which shouldn't be ignored) we think 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.