Metro Holdings (SGX:M01) Has Announced A Dividend Of S$0.03

The board of Metro Holdings Limited (SGX:M01) has announced that it will pay a dividend on the 8th of August, with investors receiving S$0.03 per share. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Metro Holdings

Metro Holdings Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Metro Holdings' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the company can't turn things around, EPS could fall by 21.7% over the next year. 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

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was S$0.06 in 2012, and the most recent fiscal year payment was S$0.02. This works out to a decline of approximately 67% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Metro Holdings' earnings per share has shrunk at 22% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Metro Holdings you should be aware of, and 1 of them is a bit concerning. 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.