Singapore Land Group Limited (SGX:U06) has announced that it will be increasing its periodic dividend on the 24th of May to SGD0.04, which will be 14% higher than last year's comparable payment amount of SGD0.035. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

View our latest analysis for Singapore Land Group

Singapore Land Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Singapore Land Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 3.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 22%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Singapore Land Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of SGD0.03 in 2014 to the most recent total annual payment of SGD0.04. This means that it has been growing its distributions at 2.9% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Singapore Land Group's EPS has declined at around 3.1% a year. 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.

Our Thoughts On Singapore Land Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Singapore Land Group has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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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