NetLink NBN Trust (SGX:CJLU) Is Paying Out A Dividend Of SGD0.0271

NetLink NBN Trust's (SGX:CJLU) investors are due to receive a payment of SGD0.0271 per share on 28th of November. This payment means that the dividend yield will be 5.5%, which is around the industry average.

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NetLink NBN Trust's Projections Indicate Future Payments May Be Unsustainable

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 14.2%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

View our latest analysis for NetLink NBN Trust

NetLink NBN Trust Doesn't Have A Long Payment History

It is great to see that NetLink NBN Trust has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of SGD0.0462 in 2018 to the most recent total annual payment of SGD0.0536. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, NetLink NBN Trust has only grown its earnings per share at 2.8% per annum over the past five years. 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 payments are bit high to be considered sustainable, and the track record isn't the best. We don't think NetLink NBN Trust is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for NetLink NBN Trust that investors should take into consideration. Is NetLink NBN Trust 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.