PNE Industries (SGX:BDA) Is Paying Out A Dividend Of SGD0.02

The board of PNE Industries Ltd (SGX:BDA) has announced that it will pay a dividend of SGD0.02 per share on the 14th of February. Based on this payment, the dividend yield will be 5.3%, which is fairly typical for the industry.

Check out our latest analysis for PNE Industries

Estimates Indicate PNE Industries' Could Struggle to Maintain Dividend Payments In The Future

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the dividend made up 196% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, EPS could fall by 30.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 263%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SGD0.016 in 2015 to the most recent total annual payment of SGD0.03. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 31% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

PNE Industries' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help PNE Industries make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for PNE Industries (of which 3 are a bit concerning!) you should know about. Is PNE Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.