Micro-Mechanics (Holdings) (SGX:5DD) Is Due To Pay A Dividend Of SGD0.03
Micro-Mechanics (Holdings) Ltd. (SGX:5DD) has announced that it will pay a dividend of SGD0.03 per share on the 10th of February. Based on this payment, the dividend yield will be 3.6%, which is fairly typical for the industry.
Micro-Mechanics (Holdings)'s Projected Earnings Seem Likely To Cover Future Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Micro-Mechanics (Holdings)'s earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, EPS could fall by 4.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 69%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Check out our latest analysis for Micro-Mechanics (Holdings)
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2016, the dividend has gone from SGD0.03 total annually to SGD0.06. This means that it has been growing its distributions at 7.2% 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. Micro-Mechanics (Holdings) might have put its house in order since then, but we remain cautious.
Micro-Mechanics (Holdings) May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Micro-Mechanics (Holdings)'s earnings per share has shrunk at approximately 4.8% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On Micro-Mechanics (Holdings)'s Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. To that end, Micro-Mechanics (Holdings) has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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