CSE Global (SGX:544) Is Due To Pay A Dividend Of SGD0.015

CSE Global Limited's (SGX:544) investors are due to receive a payment of SGD0.015 per share on 26th of June. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

See our latest analysis for CSE Global

CSE Global's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, CSE Global's dividend made up quite a large proportion of earnings but only 55% of free cash flows. 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.

Over the next year, EPS is forecast to expand by 60.1%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 51% which brings it into quite a comfortable range.

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. Since 2014, the dividend has gone from SGD0.0425 total annually to SGD0.0275. The dividend has shrunk at around 4.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

CSE Global May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though CSE Global's EPS has declined at around 4.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

An additional note is that the company has been raising capital by issuing stock equal to 10% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On CSE Global's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about CSE Global's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for CSE Global that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.