In This Article:
Wing Tai Holdings Limited's (SGX:W05) investors are due to receive a payment of SGD0.06 per share on 18th of November. This means the dividend yield will be fairly typical at 3.9%.
View our latest analysis for Wing Tai Holdings
Wing Tai Holdings Doesn't Earn Enough To Cover Its Payments
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Wing Tai Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 88.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was SGD0.07 in 2012, and the most recent fiscal year payment was SGD0.06. The dividend has shrunk at around 1.5% a year during that period. 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.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Wing Tai Holdings has impressed us by growing EPS at 45% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like Wing Tai Holdings' Dividend
Overall, we like to see the dividend staying consistent, and we think Wing Tai Holdings might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
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. Case in point: We've spotted 2 warning signs for Wing Tai Holdings (of which 1 is concerning!) you should know about. Is Wing Tai Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.