SIA Engineering (SGX:S59) Has Affirmed Its Dividend Of SGD0.06

SIA Engineering Company Limited (SGX:S59) has announced that it will pay a dividend of SGD0.06 per share on the 14th of August. This means the dividend yield will be fairly typical at 3.5%.

View our latest analysis for SIA Engineering

SIA Engineering's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, SIA Engineering was paying out quite a large proportion of both earnings and cash flow, with the dividend being 173% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 86.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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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 SGD0.22 in 2014, and the most recent fiscal year payment was SGD0.08. This works out to be a decline of approximately 9.6% per year over that time. 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.

Dividend Growth Is Doubtful

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. SIA Engineering has seen earnings per share falling at 9.6% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

SIA Engineering's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think SIA Engineering is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 SIA Engineering 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.

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