The board of Indofood Agri Resources Ltd. (SGX:5JS) has announced that it will pay a dividend on the 28th of May, with investors receiving IDR0.008 per share. The dividend yield is 2.6% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Indofood Agri Resources

Indofood Agri Resources' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Indofood Agri Resources was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 56.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 0.001% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from IDR46.54 total annually to IDR93.02. This means that it has been growing its distributions at 7.2% per annum 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Indofood Agri Resources has grown earnings per share at 56% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Indofood Agri Resources Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. See if management have their own wealth at stake, by checking insider shareholdings in Indofood Agri Resources stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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