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

Venture Corporation Limited (SGX:V03) has announced that it will pay a dividend of S$0.50 per share on the 24th of May. This payment means that the dividend yield will be 4.4%, which is around the industry average.

View our latest analysis for Venture

Venture's Payment Has Solid Earnings Coverage

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.

The next year is set to see EPS grow by 12.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 S$0.55 in 2012 to the most recent annual payment of S$0.75. This means that it has been growing its distributions at 3.2% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

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. Venture has seen EPS rising for the last five years, at 11% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

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 would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Venture that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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