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Wilmar International Limited's (SGX:F34) investors are due to receive a payment of $0.10 per share on 15th of May. This means that the annual payment will be 4.7% of the current stock price, which is in line with the average for the industry.
Wilmar International's Payment Could Potentially Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Wilmar International was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 44.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.
View our latest analysis for Wilmar International
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $0.0551 total annually to $0.118. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Wilmar International hasn't seen much change in its earnings per share over the last five years.
The Dividend Could Prove To Be Unreliable
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
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. To that end, Wilmar International has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.