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Yeo Hiap Seng Limited's (SGX:Y03) investors are due to receive a payment of SGD0.02 per share on 20th of June. Including this payment, the dividend yield on the stock will be 3.7%, which is a modest boost for shareholders' returns.
Estimates Indicate Yeo Hiap Seng's Could Struggle to Maintain Dividend Payments In The Future
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 181% of what it was earning and 89% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Looking forward, EPS could fall by 18.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 223%, which could put the dividend under pressure if earnings don't start to improve.
See our latest analysis for Yeo Hiap Seng
Yeo Hiap Seng Has A Solid Track Record
The company has an extended history of paying stable dividends. The last annual payment of SGD0.02 was flat on the annual payment from10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Earnings per share has been sinking by 18% over the last 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.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
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 1 warning sign for Yeo Hiap Seng that you should be aware of before investing. 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.