Yahoo Finance It Might Not Be A Great Idea To Buy Singapore Press Holdings Limited (SGX:T39) For Its Next Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Singapore Press Holdings Limited (SGX:T39) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 6th of December in order to be eligible for this dividend, which will be paid on the 20th of December.
Singapore Press Holdings's next dividend payment will be S$0.065 per share, and in the last 12 months, the company paid a total of S$0.12 per share. Looking at the last 12 months of distributions, Singapore Press Holdings has a trailing yield of approximately 5.5% on its current stock price of SGD2.2. If you buy this business for its dividend, you should have an idea of whether Singapore Press Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Singapore Press Holdings has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Singapore Press Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Singapore Press Holdings paid out more free cash flow than it generated - 127%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Singapore Press Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Singapore Press Holdings's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Singapore Press Holdings's earnings per share have fallen at approximately 12% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Singapore Press Holdings has seen its dividend decline 2.8% per annum on average over the past ten years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
Has Singapore Press Holdings got what it takes to maintain its dividend payments? Singapore Press Holdings had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Wondering what the future holds for Singapore Press Holdings? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
