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Singapore Telecommunications (SGX:Z74) Is Paying Out A Larger Dividend Than Last Year

Singapore Telecommunications Limited (SGX:Z74) will increase its dividend from last year's comparable payment on the 20th of August to SGD0.079. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.

View our latest analysis for Singapore Telecommunications

Singapore Telecommunications' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 311% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

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According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 63% which is fairly sustainable.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from SGD0.168 total annually to SGD0.15. Doing the maths, this is a decline of about 1.1% 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Singapore Telecommunications' earnings per share has shrunk at 24% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of Singapore Telecommunications' Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Singapore Telecommunications you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com