YHI International (SGX:BPF) Will Pay A Smaller Dividend Than Last Year

YHI International Limited's (SGX:BPF) dividend is being reduced from last year's payment covering the same period to SGD0.023 on the 16th of May. This means that the dividend yield is 5.1%, which is a bit low when comparing to other companies in the industry.

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YHI International's Payment Could Potentially Have Solid Earnings Coverage

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. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, could fall by 5.8% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 84% in the next 12 months which is on the higher end of the range we would say is sustainable.

View 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 annual payment during the last 10 years was SGD0.012 in 2015, and the most recent fiscal year payment was SGD0.023. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, YHI International's earnings per share has shrunk at approximately 5.8% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for YHI International (of which 1 is significant!) you should know about. Is YHI International not quite the opportunity you were looking for? Why not check out our selection of top 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.