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GuocoLand Limited (SGX:F17) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase GuocoLand's shares before the 5th of November to receive the dividend, which will be paid on the 19th of November.
The company's next dividend payment will be S$0.06 per share, on the back of last year when the company paid a total of S$0.06 to shareholders. Last year's total dividend payments show that GuocoLand has a trailing yield of 3.8% on the current share price of S$1.58. If you buy this business for its dividend, you should have an idea of whether GuocoLand's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for GuocoLand
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. GuocoLand is paying out an acceptable 60% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that GuocoLand'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 GuocoLand paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. GuocoLand's earnings per share have fallen at approximately 14% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. GuocoLand has delivered an average of 1.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.