NetLink NBN Trust's (SGX:CJLU) Upcoming Dividend Will Be Larger Than Last Year's

NetLink NBN Trust (SGX:CJLU) will increase its dividend on the 1st of December to S$0.026, which is 1.2% higher than last year. Based on the announced payment, the dividend yield for the company will be 5.1%, which is fairly typical for the industry.

View our latest analysis for NetLink NBN Trust

NetLink NBN Trust Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 3.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

NetLink NBN Trust Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2018, the first annual payment was S$0.046, compared to the most recent full-year payment of S$0.051. This implies that the company grew its distributions at a yearly rate of about 3.3% over that duration. NetLink NBN Trust hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that NetLink NBN Trust has grown earnings per share at 19% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

NetLink NBN Trust's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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 NetLink NBN Trust that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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