Venture's (SGX:V03) Dividend Will Be SGD0.25

The board of Venture Corporation Limited (SGX:V03) has announced that it will pay a dividend of SGD0.25 per share on the 12th of September. This means that the annual payment will be 5.4% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Venture

Venture's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Venture was paying out 86% of earnings, but a comparatively small 43% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 30.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was SGD0.50 in 2014, and the most recent fiscal year payment was SGD0.75. This means that it has been growing its distributions at 4.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Venture's EPS has declined at around 7.4% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Venture that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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