The board of China Aviation Oil (Singapore) Corporation Ltd (SGX:G92) has announced that the dividend on 27th of May will be increased to $0.0505, which will be 216% higher than last year’s payment of $0.016 which covered the same period. Despite this raise, the dividend yield of 2.9% is only a modest boost to shareholder returns.
View our latest analysis for China Aviation Oil (Singapore)
China Aviation Oil (Singapore)’s Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, China Aviation Oil (Singapore)’s dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 43.2%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
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 annual payment during the last 10 years was $0.013 in 2014, and the most recent fiscal year payment was $0.0199. This means that it has been growing its distributions at 4.3% 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.
Dividend Growth May Be Hard To Come By
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 China Aviation Oil (Singapore)’s EPS has declined at around 8.9% a year. If the company is doing less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On China Aviation Oil (Singapore)’s Dividend
Overall, we always like to see the dividend being raised, but we don’t think China Aviation Oil (Singapore) will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn’t been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analyzing a company. For instance, we’ve picked out 1 warning sign for China Aviation Oil (Singapore) that investors should take into consideration. Is China Aviation Oil (Singapore) not quite the opportunity you were looking for? Why not check out our selection of top 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.
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