Ban Leong Technologies (SGX:B26) Will Pay A Smaller Dividend Than Last Year

Ban Leong Technologies Limited's (SGX:B26) dividend is being reduced from last year's payment covering the same period to SGD0.006 on the 8th of December. This means that the annual payment will be 6.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Ban Leong Technologies

Ban Leong Technologies' Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Ban Leong Technologies' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 3.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

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 annual payment during the last 10 years was SGD0.011 in 2013, and the most recent fiscal year payment was SGD0.0235. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ban Leong Technologies might have put its house in order since then, but we remain cautious.

Ban Leong Technologies May Find It Hard To Grow The Dividend

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. Earnings have grown at around 3.4% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 3.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Even though the dividend was cut this year, we think Ban Leong Technologies has the ability to make consistent payments in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Ban Leong Technologies (1 is a bit unpleasant!) that you should be aware of before investing. 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.