Spindex Industries Limited (SGX:564) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of November to SGD0.027. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

View our latest analysis for Spindex Industries

Spindex Industries' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Spindex Industries' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 0.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.022 in 2014 to the most recent total annual payment of SGD0.027. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Spindex Industries' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Spindex Industries has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Case in point: We've spotted 3 warning signs for Spindex Industries (of which 1 is concerning!) you should know about. Is Spindex Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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