Sheng Siong Group Ltd (SGX:OV8) has announced that it will pay a dividend of SGD0.032 per share on the 16th of May. Based on this payment, the dividend yield will be 3.9%, which is fairly typical for the industry.

See our latest analysis for Sheng Siong Group

Sheng Siong Group's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Sheng Siong Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 9.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which is in the range that makes us comfortable with the sustainability of the dividend.

SGX:OV8 Historic Dividend March 7th 2025

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SGD0.029 in 2015 to the most recent total annual payment of SGD0.064. This means that it has been growing its distributions at 8.2% 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. Sheng Siong Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sheng Siong Group has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Sheng Siong Group Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one.