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Readers hoping to buy Jardine Matheson Holdings Limited (SGX:J36) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. This means that investors who purchase Jardine Matheson Holdings' shares on or after the 20th of March will not receive the dividend, which will be paid on the 14th of May.
The company's next dividend payment will be US$1.65 per share. Last year, in total, the company distributed US$2.25 to shareholders. Last year's total dividend payments show that Jardine Matheson Holdings has a trailing yield of 5.2% on the current share price of US$43.06. If you buy this business for its dividend, you should have an idea of whether Jardine Matheson Holdings's dividend is reliable and sustainable. So we need to investigate whether Jardine Matheson Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Jardine Matheson Holdings
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. Jardine Matheson Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Jardine Matheson Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Jardine Matheson Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Jardine Matheson Holdings has delivered an average of 4.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.