Venture (SGX:V03) Will Pay A Dividend Of SGD0.50

The board of Venture Corporation Limited ( SGX:V03 ) has announced that it will pay a dividend of SGD0.50 per share on the 21st of May. This payment means that the dividend yield will be 5.3%, which is around the industry average.

View our latest analysis for Venture

Venture's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Venture's dividend made up quite a large proportion of earnings but only 46% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 7.94% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company has a long dividend track record, and it's great to see there have been no cuts in the recent past. Since 2014, the dividend has gone from SGD0.50 total annually to SGD0.75. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. 

Dividend Growth May Be Hard To Come By

Even with a relatively stable dividend, it's even more important to see if earnings per share is growing. Venture has seen earnings per share falling at 6.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Venture that investors should take into consideration. Is Venture 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.