NSL's (SGX:N02) Dividend Will Be SGD0.05

NSL Ltd (SGX:N02) has announced that it will pay a dividend of SGD0.05 per share on the 24th of May. This makes the dividend yield 5.7%, which will augment investor returns quite nicely.

Check out our latest analysis for NSL

NSL Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 175% of what it was earning and 82% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Earnings per share could rise by 19.6% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 146% over the next year.

NSL's Dividend Has Lacked Consistency

NSL has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was SGD0.10, compared to the most recent full-year payment of SGD0.05. The dividend has shrunk at around 7.4% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

NSL Might Find It Hard To Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that NSL has been growing its earnings per share at 20% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

NSL's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for NSL that investors need to be conscious of moving forward. 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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