Pan-United Corporation Ltd (SGX:P52) will increase its dividend on the 16th of May to SGD0.023, which is 28% higher than last year's payment from the same period of SGD0.018. The payment will take the dividend yield to 5.0%, which is in line with the average for the industry.

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Pan-United's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Pan-United's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 46.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Pan-United

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from SGD0.0425 total annually to SGD0.03. This works out to be a decline of approximately 3.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

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. Pan-United has seen EPS rising for the last five years, at 15% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Pan-United Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Pan-United is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Pan-United that investors need to be conscious of moving forward. Is Pan-United not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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