Avi-Tech Holdings (SGX:1R6) Is Paying Out A Dividend Of SGD0.0075

Avi-Tech Holdings Limited's (SGX:1R6) investors are due to receive a payment of SGD0.0075 per share on 18th of May. The dividend yield will be 6.9% based on this payment which is still above the industry average.

View our latest analysis for Avi-Tech Holdings

Avi-Tech Holdings Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. At the time of the last dividend payment, Avi-Tech Holdings was paying out a very large proportion of what it was earning and 509% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, EPS could fall by 14.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 107%, which could put the dividend in jeopardy if the company's earnings don't improve.

Avi-Tech Holdings' Dividend Has Lacked Consistency

Avi-Tech Holdings has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of SGD0.012 in 2015 to the most recent total annual payment of SGD0.0175. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Avi-Tech Holdings' EPS has declined at around 15% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Avi-Tech Holdings (of which 3 are concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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