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Singapore Telecommunications Limited (SGX:Z74) will increase its dividend from last year's comparable payment on the 9th of December to SGD0.089. This takes the annual payment to 5.3% of the current stock price, which is about average for the industry.
View our latest analysis for Singapore Telecommunications
Singapore Telecommunications' Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate Singapore Telecommunications' Could Struggle to Maintain Dividend Payments In The Future
Singapore Telecommunications' Future Dividends May Potentially Be At Risk
Unless the payments are sustainable, the dividend yield doesn't mean too much. Singapore Telecommunications isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.
Earnings per share is forecast to rise by 158.1% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.
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 annual payment back then was SGD0.168, compared to the most recent full-year payment of SGD0.169. Dividend payments have grown at less than 1% a year over this period. 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's Growth Prospects Are Limited
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. Singapore Telecommunications hasn't seen much change in its earnings per share over the last five years. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.
Singapore Telecommunications' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Singapore Telecommunications' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Singapore Telecommunications that investors need to be conscious of moving forward. 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.