The board of PNE Industries Ltd (SGX:BDA) has announced that it will pay a dividend of SGD0.02 per share on the 14th of February. Based on this payment, the dividend yield will be 5.3%, which is fairly typical for the industry.

Check out our latest analysis for PNE Industries

Estimates Indicate PNE Industries' Could Struggle to Maintain Dividend Payments In The Future

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the dividend made up 196% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, EPS could fall by 30.9% 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 reach 263%, which could put the dividend under pressure if earnings don't start to improve.

SGX:BDA Historic Dividend January 7th 2025

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SGD0.016 in 2015 to the most recent total annual payment of SGD0.03. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 31% 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

Overall, while some might be pleased that the dividend wasn't cut, we think this may help PNE Industries make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.