ComfortDelGro (SGX:C52) Will Pay A Dividend Of S$0.021

The board of ComfortDelGro Corporation Limited (SGX:C52) has announced that it will pay a dividend of S$0.021 per share on the 27th of May. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

See our latest analysis for ComfortDelGro

ComfortDelGro's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, ComfortDelGro's dividend made up quite a large proportion of earnings but only 20% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 53.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was S$0.056 in 2012, and the most recent fiscal year payment was S$0.042. This works out to be a decline of approximately 2.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ComfortDelGro's EPS has fallen by approximately 16% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for ComfortDelGro that investors need to be conscious of moving forward. Is ComfortDelGro not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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