Sembcorp Industries (SGX:U96) Will Pay A Larger Dividend Than Last Year At SGD0.08

Sembcorp Industries Ltd (SGX:U96) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of May to SGD0.08. Even though the dividend went up, the yield is still quite low at only 2.2%.

View our latest analysis for Sembcorp Industries

Sembcorp Industries' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Sembcorp Industries' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 3.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SGD0.17 in 2013, and the most recent fiscal year payment was SGD0.08. The dividend has shrunk at around 7.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Sembcorp Industries has been growing its earnings per share at 16% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Sembcorp Industries' prospects of growing its dividend payments in the future.

We Really Like Sembcorp Industries' Dividend

Overall, a dividend increase is always good, and we think that Sembcorp Industries is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Sembcorp Industries you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.