ComfortDelGro (SGX:C52) Has Affirmed Its Dividend Of S$0.021

The board of ComfortDelGro Corporation Limited (SGX:C52) has announced that it will pay a dividend on the 27th of May, with investors receiving S$0.021 per share. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for ComfortDelGro

ComfortDelGro's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, ComfortDelGro's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 51.6%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from S$0.06 in 2012 to the most recent annual payment of S$0.042. Doing the maths, this is a decline of about 3.5% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 16% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On ComfortDelGro's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ComfortDelGro's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for ComfortDelGro that investors should know about before committing capital to this stock. Is ComfortDelGro not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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