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The board of Penguin International Limited (SGX:BTM) has announced that it will pay a dividend on the 23rd of May, with investors receiving SGD0.0225 per share. This payment means that the dividend yield will be 3.2%, which is around the industry average.
View our latest analysis for Penguin International
Penguin International's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Penguin International's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share could rise by 35.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.
Penguin International's Dividend Has Lacked Consistency
It's comforting to see that Penguin International has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2014, the annual payment back then was SGD0.015, compared to the most recent full-year payment of SGD0.0225. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
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. Penguin International has impressed us by growing EPS at 36% per year over the past five years. Penguin International is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Our Thoughts On Penguin International's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Penguin International that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.