Tai Sin Electric Limited (SGX:500) will pay a dividend of SGD0.0075 on the 12th of March. The dividend yield will be 5.9% based on this payment which is still above the industry average.

Check out our latest analysis for Tai Sin Electric

Tai Sin Electric's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Tai Sin Electric's dividend was only 46% of earnings, however it was paying out 152% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 8.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from SGD0.0225 total annually to SGD0.0235. Dividend payments have been growing, but very slowly over the period. 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.

Tai Sin Electric Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Tai Sin Electric has been growing its earnings per share at 8.2% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Tai Sin Electric's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Tai Sin Electric that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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