Singapore Telecommunications' (SGX:Z74) Upcoming Dividend Will Be Larger Than Last Year's

The board of Singapore Telecommunications Limited (SGX:Z74) has announced that the dividend on 19th of August will be increased to SGD0.10, which will be 27% higher than last year's payment of SGD0.079 which covered the same period. This makes the dividend yield about the same as the industry average at 4.4%.

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Singapore Telecommunications' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last dividend, Singapore Telecommunications is earning enough to cover the payment, but then it makes up 796% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 16.3% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 89%, meaning that most of the company's earnings are being paid out to shareholders.

See our latest analysis for Singapore Telecommunications

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was SGD0.168, compared to the most recent full-year payment of SGD0.17. Its dividends have grown at less than 1% per annum over this time frame. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Singapore Telecommunications has been growing its earnings per share at 30% a year over the past five years. Singapore Telecommunications is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Singapore Telecommunications' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Singapore Telecommunications you should be aware of, and 1 of them is concerning. 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.