Yahoo Finance Sheng Siong Group's (SGX:OV8) Upcoming Dividend Will Be Larger Than Last Year's
The board of Sheng Siong Group Ltd (SGX:OV8) has announced that it will be increasing its dividend by 4.2% on the 17th of May to SGD0.032, up from last year's comparable payment of SGD0.0307. This makes the dividend yield about the same as the industry average at 4.1%.
View our latest analysis for Sheng Siong Group
Sheng Siong Group's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Sheng Siong Group was paying out 70% of earnings, but a comparatively small 54% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 8.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, 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 annual payment during the last 10 years was SGD0.0295 in 2014, and the most recent fiscal year payment was SGD0.0625. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Sheng Siong Group has grown earnings per share at 14% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
Sheng Siong Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Sheng Siong Group that you should be aware of before investing. 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.
