Metro Holdings' (SGX:M01) Dividend Will Be SGD0.03

Metro Holdings Limited (SGX:M01) has announced that it will pay a dividend of SGD0.03 per share on the 8th of August. This payment means that the dividend yield will be 2.6%, which is around the industry average.

Check out our latest analysis for Metro Holdings

Metro Holdings Doesn't Earn Enough To Cover Its Payments

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Metro Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 21.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 179%, which could put the dividend in jeopardy if the company's earnings don't improve.

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 SGD0.06 in 2012, and the most recent fiscal year payment was SGD0.02. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Metro Holdings' earnings per share has shrunk at 22% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Metro Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Metro Holdings' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Metro Holdings (1 is significant!) that you should be aware of before investing. Is Metro Holdings 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.