DBS Group Holdings Ltd (SGX:D05) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of April to SGD0.92. Based on this payment, the dividend yield for the company will be 4.8%, which is fairly typical for the industry.

See our latest analysis for DBS Group Holdings

DBS Group Holdings' Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

DBS Group Holdings has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on DBS Group Holdings' last earnings report, the payout ratio is at a decent 47%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 30.8% over the next 3 years. The future payout ratio could be 49% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SGD0.56 in 2013, and the most recent fiscal year payment was SGD1.68. This means that it has been growing its distributions at 12% per annum over that time. DBS Group Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. DBS Group Holdings has seen EPS rising for the last five years, at 14% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

DBS Group Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for DBS Group Holdings (1 is concerning!) that you should be aware of before investing. Is DBS Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.

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