Singapore Telecommunications' (SGX:Z74) Dividend Will Be Increased To SGD0.079

Singapore Telecommunications Limited (SGX:Z74) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of August to SGD0.079. Based on this payment, the dividend yield for the company will be 5.4%, which is fairly typical for the industry.

Check out our latest analysis for Singapore Telecommunications

Singapore Telecommunications' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

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 SGD0.168, compared to the most recent full-year payment of SGD0.15. This works out to be a decline of approximately 1.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Singapore Telecommunications' EPS has declined at around 24% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Singapore Telecommunications' Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Singapore Telecommunications (of which 1 is significant!) you should know about. Is Singapore Telecommunications 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.

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