The board of Wilmar International Limited (SGX:F34) has announced that it will pay a dividend on the 15th of May, with investors receiving $0.10 per share. Despite the cut, the dividend yield of 5.1% will still be comparable to other companies in the industry.

Check out our latest analysis for Wilmar International

Wilmar International's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Wilmar International's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 44.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

SGX:F34 Historic Dividend February 25th 2025

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.0551 in 2015 to the most recent total annual payment of $0.119. This means that it has been growing its distributions at 8.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wilmar International might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Wilmar International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Wilmar International's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Wilmar International is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Wilmar International (of which 1 doesn't sit too well with us!) you should know about. Is Wilmar International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.