NetLink NBN Trust (SGX:CJLU) Has Affirmed Its Dividend Of SGD0.0268

The board of NetLink NBN Trust (SGX:CJLU) has announced that it will pay a dividend on the 11th of June, with investors receiving SGD0.0268 per share. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

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Estimates Indicate NetLink NBN Trust's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 11.3% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 197% over the next year.

Check out our latest analysis for NetLink NBN Trust

NetLink NBN Trust Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the dividend has gone from SGD0.0462 total annually to SGD0.0536. This means that it has been growing its distributions at 2.1% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

NetLink NBN Trust May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 4.1% per year. With such low earnings growth, paying out more than double what it is earning is setting up NetLink NBN Trust to have to cut earnings in the future.

NetLink NBN Trust's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NetLink NBN Trust's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for NetLink NBN Trust that investors need to be conscious of moving forward. 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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