Micro-Mechanics (Holdings) (SGX:5DD) Has Affirmed Its Dividend Of SGD0.03

Micro-Mechanics (Holdings) Ltd. (SGX:5DD) will pay a dividend of SGD0.03 on the 18th of November. This means the dividend yield will be fairly typical at 4.0%.

See our latest analysis for Micro-Mechanics (Holdings)

Micro-Mechanics (Holdings) Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Micro-Mechanics (Holdings)'s dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 9.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 127%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.03 in 2014 to the most recent total annual payment of SGD0.06. This means that it has been growing its distributions at 7.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Micro-Mechanics (Holdings)'s earnings per share has fallen at approximately 9.1% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Micro-Mechanics (Holdings)'s Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Micro-Mechanics (Holdings)'s 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Micro-Mechanics (Holdings) has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.