Stamford Tyres Corporation Limited's (SGX:S29) investors are due to receive a payment of SGD0.015 per share on 25th of September. This means the dividend yield will be fairly typical at 7.3%.
Check out our latest analysis for Stamford Tyres
Stamford Tyres' Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 86% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, could fall by 4.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 88%, which is definitely on the higher side.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The most recent annual payment of SGD0.015 is about the same as the annual payment 10 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
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. Stamford Tyres has seen earnings per share falling at 4.5% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On Stamford Tyres' Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. We don't think Stamford Tyres is a great stock to add to your portfolio if income is your focus.
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. Case in point: We've spotted 3 warning signs for Stamford Tyres (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
About SGX:S29
Stamford Tyres
An investment holding company, engages in the wholesale and retail of tires and wheels in Southeast Asia, North Asia, Africa, and internationally.
Slight and fair value.