Hotung Investment Holdings (SGX:BLS): A High-Yield Dividend Play, But Can It Last?

Investors seeking income opportunities in Singapore's asset management sector are drawn to Hotung Investment Holdings (BLS), which boasts a dividend yield of 7.65% as of May 2025. However, beneath the surface of this attractive payout lies a critical question: Can the company sustain its dividend policy amid declining earnings and a payout ratio that exceeds 150%? Let's dissect the numbers to uncover the risks and rewards.

The Allure of High Dividends

Hotung's fiscal 2024 results reveal a DPS of S$0.11, supported by a dividend yield well above the industry average. For income-focused investors, this represents a compelling entry point. The trailing annual yield has historically ranged between 5.63% and 14.47%, with a median of 8.78%, suggesting BLS has a history of rewarding shareholders. The current yield sits comfortably within this range, offering stability for retirees or those prioritizing cash flow.

But the devil is in the details. The company's dividend payout ratio—a key metric linking dividends to earnings—has surged to 152.88% for fiscal 2024. This means dividends exceeded net income by over 50%, a red flag for sustainability. While the payout ratio based on cash flow (82.4%) remains manageable, the earnings-based metric paints a bleaker picture.

Earnings Trajectory: A Cause for Concern

The root of the payout ratio issue lies in BLS's deteriorating earnings. Over the past five years, EPS has declined by a staggering 30.7% annually, eroding the foundation of the dividend. Even in fiscal 2024, EPS of S$0.07 lagged behind DPS, forcing the company to dip into cash reserves to fund payouts.

The data underscores a troubling trend: DPS growth has stagnated, with a -18.7% 3-year average decline and a -3.2% 5-year average decline. Without a reversal in earnings momentum, BLS risks depleting its cash buffer—a critical safety net currently valued at S$79.13 million, or S$0.82 per share—to sustain dividends.

The Cash Cushion: A Short-Term Lifeline

BLS's strong liquidity position offers a temporary reprieve. With net cash per share exceeding the DPS by a wide margin (S$0.82 vs. S$0.11), the company has ~7.5 years of dividend cover based on current cash reserves alone. This buys time for management to stabilize earnings, perhaps through asset sales, cost-cutting, or strategic investments.

However, the clock is ticking. If earnings continue to shrink, the cash pile will eventually dwindle. Investors must ask: Can BLS reverse its EPS decline, or is the dividend policy unsustainable in the long term?

The Investment Case: High Reward, High Risk

For income investors willing to accept risk, BLS presents an intriguing opportunity. The 7.65% yield is a rare find in a low-interest-rate environment, and the cash reserves provide a tangible buffer. Those with a 1-3 year horizon might bet on management's ability to stabilize earnings through asset monetization or operational efficiency.

But the risks are clear. A sustained EPS decline could force a dividend cut, eroding both income and share price. Additionally, the stock's historically high volatility—as seen in its price swings over the past decade—adds uncertainty.

Final Verdict: A High-Yield Gamble Worth Taking?

Hotung Investment Holdings is a high-risk, high-reward play for income investors. The dividend yield is mouthwatering, and the cash reserves offer short-term security. However, the earnings trajectory and payout ratio are warning signs that demand close monitoring.

Investors should consider a small, speculative position in BLS, using stops to limit downside risk. Pair this with a watchlist alert for EPS recovery signals—such as cost reductions, new revenue streams, or asset sales. For those prioritizing safety, this remains a “wait-and-see” story.

The bottom line? BLS's dividend is alive today but not guaranteed tomorrow. Act quickly if you're comfortable with the risks—or wait for clearer signs of turnaround.

This analysis is for informational purposes only and should not be construed as personalized investment advice.