CSE Global (SGX:544) Will Pay A Dividend Of SGD0.0125

CSE Global Limited's (SGX:544) investors are due to receive a payment of SGD0.0125 per share on 27th of September. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.

See our latest analysis for CSE Global

CSE Global's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by CSE Global's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 42.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 dividend has gone from an annual total of SGD0.0425 in 2014 to the most recent total annual payment of SGD0.0275. The dividend has shrunk at around 4.3% a year during that period. 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.

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 2.8% 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.

We should note that CSE Global has issued stock equal to 13% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

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 would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for CSE Global that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend 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.