StarHub (SGX:CC3) Is Due To Pay A Dividend Of SGD0.03

The board of StarHub Ltd (SGX:CC3) has announced that it will pay a dividend of SGD0.03 per share on the 6th of September. This will take the dividend yield to an attractive 6.6%, providing a nice boost to shareholder returns.

View our latest analysis for StarHub

StarHub's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, StarHub's dividend made up quite a large proportion of earnings but only 48% 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%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 55% which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was SGD0.20, compared to the most recent full-year payment of SGD0.084. This works out to be a decline of approximately 8.3% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. StarHub hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think StarHub's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think StarHub is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for StarHub that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.