ComfortDelGro (SGX:C52) Will Pay A Dividend Of SGD0.029 On Sept 1

ComfortDelGro Corporation Limited ( SGX:C52 ) has announced that on 1st of September, it will be paying a dividend ofSGD0.029. This means the annual payment is 4.5% 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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 74% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 49.5%. If the dividend continues on this path, the payout ratio could be 73% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend has seen at least one cut in the last 10 years. Since 2013, the annual payment back then was SGD0.064, compared to the most recent full-year payment of SGD0.058. The dividend has shrunk at a rate of less than 1% a year over this period. 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ComfortDelGro's EPS has fallen by approximately 13% per year during the past five years. 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.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for ComfortDelGro that investors should take into consideration. Is ComfortDelGro not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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