Oversea-Chinese Banking (SGX:O39) Has Announced That It Will Be Increasing Its Dividend To SGD0.40
The board of Oversea-Chinese Banking Corporation Limited (SGX:O39) has announced that it will be paying its dividend of SGD0.40 on the 19th of May, an increased payment from last year's comparable dividend. This will take the annual payment to 6.3% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Oversea-Chinese Banking
Oversea-Chinese Banking's Payment Expected To Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Having distributed dividends for at least 10 years, Oversea-Chinese Banking 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 50%, which means that Oversea-Chinese Banking would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 5.6%. The future payout ratio could be 51% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from SGD0.32 total annually to SGD0.80. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Has Growth Potential
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. Oversea-Chinese Banking has seen EPS rising for the last five years, at 6.0% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Our Thoughts On Oversea-Chinese Banking's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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 analysing a company. For example, we've picked out 1 warning sign for Oversea-Chinese Banking 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.
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