Stamford Tyres (SGX:S29) Will Pay A Dividend Of SGD0.015

Stamford Tyres Corporation Limited's (SGX:S29) investors are due to receive a payment of SGD0.015 per share on 25th of September. Based on this payment, the dividend yield will be 7.1%, which is fairly typical for the industry.

View our latest analysis for Stamford Tyres

Stamford Tyres' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Stamford Tyres' dividend made up quite a large proportion of earnings but only 28% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to fall by 4.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 88%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The most recent annual payment of SGD0.015 is about the same as the annual payment 10 years ago. 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 Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Stamford Tyres' earnings per share has shrunk at approximately 4.5% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Stamford Tyres' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Stamford Tyres you should be aware of, and 1 of them doesn't sit too well with us. Is Stamford Tyres not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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