PNE Industries' (SGX:BDA) Dividend Will Be SGD0.02

PNE Industries Ltd (SGX:BDA) has announced that it will pay a dividend of SGD0.02 per share on the 16th of February. This means that the annual payment will be 4.8% of the current stock price, which is in line with the average for the industry.

See our latest analysis for PNE Industries

PNE Industries Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 334% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to fall by 32.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 486%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from SGD0.016 total annually to SGD0.03. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. PNE Industries' EPS has fallen by approximately 32% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of PNE Industries' Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, PNE Industries has 6 warning signs (and 3 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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