The board of Wing Tai Holdings Limited (SGX:W05) has announced that it will pay a dividend of SGD0.03 per share on the 17th of November. Including this payment, the dividend yield on the stock will be 2.0%, which is a modest boost for shareholders’ returns.
We’ve found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even in the absence of profits, Wing Tai Holdings is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Looking forward, earnings per share could 47.4% over the next year if the trend of the last few years can’t be broken. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.
View our latest analysis for Wing Tai Holdings
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 last annual payment of SGD0.03 was flat on the annual payment from10 years ago. It’s encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Over the past five years, it looks as though Wing Tai Holdings’ EPS has declined at around 47% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Overall, this isn’t a great candidate as an income investment, even though the dividend was stable this year. The company seems to be stretching itself a bit to make such big payments, but it doesn’t appear they can be consistent over time. We don’t think that this is a great candidate to be an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we’ve picked out 1 warning sign for Wing Tai Holdings that investors should take into consideration. Is Wing Tai Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.