Tai Sin Electric: Dividend Distribution with a Question Mark

Tai Sin Electric plans to pay a dividend of 0.016 SGD on November 13. This payment promises an attractive dividend yield of 5.8%—a figure that exceeds the industry average. However, high dividend yields are of little value if they are not sustainable. The previous dividend accounted for a substantial portion of the free cash flows, which were already limited. In the long term, this is a strategy with some risk. If recent trends continue, earnings per share could increase by 3.3% next year. This could lead to a payout ratio of 72%, which may be sustainable. Nonetheless, the company's dividend history and interim cuts over the last ten years indicate a certain inconsistency. Since 2014, annual payments have only slightly increased from 0.0225 SGD to 0.0235 SGD. Although mild dividend growth is welcome, it is offset by past volatility. The stability of earnings per share is particularly crucial here. Over the past five years, earnings have only increased by 3.3% annually—a moderate growth rate, but still better than a decline. Tai Sin Electric distributes the majority of its earnings to shareholders, which could indicate that future dividends will grow more slowly. In summary, despite a stable dividend this year, Tai Sin Electric does not seem to be an optimal choice for dividend hunters. The low payout ratio remains a positive factor, but this is offset by the limited free funds to cover the payments. A fundamental evaluation should consider other aspects, especially in light of an identified warning sign at Tai Sin Electric. For investors seeking attractive dividend stocks, it might be worthwhile to consider alternative options.