Yahoo Finance Hong Leong Finance (SGX:S41) Has Announced A Dividend Of SGD0.09
Hong Leong Finance Limited (SGX:S41) will pay a dividend of SGD0.09 on the 24th of May. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.
See our latest analysis for Hong Leong Finance
Hong Leong Finance's Earnings Will Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Having distributed dividends for at least 10 years, Hong Leong Finance has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 57%, which means that Hong Leong Finance would be able to pay its last dividend without pressure on the balance sheet.
EPS is set to fall by 4.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the future payout ratio could be 65%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SGD0.12 in 2014, and the most recent fiscal year payment was SGD0.168. This means that it has been growing its distributions at 3.4% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Hong Leong Finance May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Hong Leong Finance's earnings per share has fallen at approximately 4.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Our Thoughts On Hong Leong Finance's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Hong Leong Finance has been making. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Hong Leong Finance that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
