Oversea-Chinese Banking's (SGX:O39) Dividend Will Be Increased To SGD0.40
Oversea-Chinese Banking Corporation Limited (SGX:O39) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of May to SGD0.40. 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
Impressive dividend yields are good, but this doesn't matter much if the payments 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. Past distributions do not necessarily guarantee future ones, but Oversea-Chinese Banking's payout ratio of 54% is a good sign as this means that earnings decently cover dividends.
Looking forward, EPS is forecast to rise by 28.0% over the next 3 years. 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 has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was SGD0.30, compared to the most recent full-year payment of SGD0.80. This means that it has been growing its distributions at 10% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Oversea-Chinese Banking Could Grow Its 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. We are encouraged to see that Oversea-Chinese Banking has grown earnings per share at 6.1% per year over the past five years. 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, this is a reasonable dividend, and it being raised is an added bonus. 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. Just as an example, we've come across 2 warning signs for Oversea-Chinese Banking you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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