QAF (SGX:Q01) Has Announced A Dividend Of SGD0.04

QAF Limited (SGX:Q01) has announced that it will pay a dividend of SGD0.04 per share on the 23rd of May. Based on this payment, the dividend yield will be 5.9%, which is fairly typical for the industry.

See our latest analysis for QAF

QAF's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share could rise by 27.4% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 82%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

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QAF Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The most recent annual payment of SGD0.05 is about the same as the annual payment 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

QAF's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that QAF has grown earnings per share at 27% per year over the past five years. Although earnings per share is up nicely QAF is paying out 105% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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. We don't think QAF is a great stock to add to your portfolio if income is your focus.

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. To that end, QAF has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.