SATS (SGX:S58) Is Increasing Its Dividend To SGD0.035

SATS Ltd.'s (SGX:S58) dividend will be increasing from last year's payment of the same period to SGD0.035 on 15th of August. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

SATS' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, SATS was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 52.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for SATS

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from SGD0.13 total annually to SGD0.07. Doing the maths, this is a decline of about 6.0% 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.

SATS May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Unfortunately, SATS' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If SATS is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On SATS' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for SATS that you should be aware of before investing. 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.