PNE Industries (SGX:BDA) Is Paying Out A Dividend Of SGD0.02

The board of PNE Industries Ltd (SGX:BDA) has announced that it will pay a dividend of SGD0.02 per share on the 13th of February. Based on this payment, the dividend yield will be 5.7%, which is fairly typical for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

PNE Industries' Projections Indicate Future Payments May Be Unsustainable

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the dividend made up 481% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

If the company can't turn things around, EPS could fall by 39.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 745%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for PNE Industries

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SGD0.12 in 2016, and the most recent fiscal year payment was SGD0.03. The dividend has fallen 75% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 39% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

PNE Industries' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. 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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for PNE Industries (of which 2 are a bit concerning!) 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.