The board of Micro-Mechanics (Holdings) Ltd. (SGX:5DD) has announced that it will pay a dividend of SGD0.03 per share on the 10th of February. This means the dividend yield will be fairly typical at 3.6%.
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Micro-Mechanics (Holdings)’s dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, EPS could fall by 4.8% 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 be 69%, which we are pretty comfortable with and we think is feasible on an earnings basis.
SGX:5DD Historic Dividend February 1st 2026
Check out our latest analysis for Micro-Mechanics (Holdings)
The company has a long dividend track record, but it doesn’t look great with cuts in the past. Since 2016, the dividend has gone from SGD0.03 total annually to SGD0.06. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. A reasonable rate of dividend growth is good to see, but we’re wary that the dividend history is not as solid as we’d like, having been cut at least once.
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Micro-Mechanics (Holdings) has seen earnings per share falling at 4.8% per year over the last five years. A modest decline in earnings isn’t great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Micro-Mechanics (Holdings)’s payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we’ve identified 2 warning signs for Micro-Mechanics (Holdings) (1 can’t be ignored!) that you should be aware of before investing. Is Micro-Mechanics (Holdings) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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