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It looks like ABR Holdings Limited (SGX:533) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase ABR Holdings' shares before the 4th of September in order to be eligible for the dividend, which will be paid on the 20th of September.
The company's next dividend payment will be S$0.0025 per share, and in the last 12 months, the company paid a total of S$0.012 per share. Last year's total dividend payments show that ABR Holdings has a trailing yield of 2.8% on the current share price of S$0.44. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for ABR Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ABR Holdings paid out 64% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that ABR Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit ABR Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at ABR Holdings, with earnings per share up 7.6% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.