Venture (SGX:V03) Has Re-Affirmed Its Dividend Of S$0.50

Venture Corporation Limited (SGX:V03) will pay a dividend of S$0.50 on the 24th of May. This means that the annual payment will be 4.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Venture

Venture's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Venture's dividend was only 70% of earnings, however it was paying out 241% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 18.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 64% by next year, which is in a pretty sustainable 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 2012, the first annual payment was S$0.55, compared to the most recent full-year payment of S$0.75. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Venture has grown earnings per share at 11% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Venture's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Venture's payments, as there could be some issues with sustaining them into the future. While Venture is earning enough to cover the payments, the cash flows are lacking. We don't think Venture is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Venture that investors should know about before committing capital to this stock. Is Venture not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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