Powermatic Data Systems (SGX:BCY) Will Pay A Dividend Of SGD0.10

Powermatic Data Systems Limited's (SGX:BCY) investors are due to receive a payment of SGD0.10 per share on 26th of August. This payment means that the dividend yield will be 2.8%, which is around the industry average.

Check out our latest analysis for Powermatic Data Systems

Powermatic Data Systems' Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Powermatic Data Systems was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 9.8% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 95% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was SGD0.05, compared to the most recent full-year payment of SGD0.10. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Come By

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. In the last five years, Powermatic Data Systems' earnings per share has shrunk at approximately 9.8% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Powermatic Data Systems' Dividend

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Powermatic Data Systems has 5 warning signs (and 1 which is a bit concerning) we think you should know about. Is Powermatic Data Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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