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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Sheng Siong Group Ltd (SGX:OV8) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Sheng Siong Group's shares before the 17th of August in order to be eligible for the dividend, which will be paid on the 30th of August.
The company's next dividend payment will be S$0.03 per share, on the back of last year when the company paid a total of S$0.061 to shareholders. Calculating the last year's worth of payments shows that Sheng Siong Group has a trailing yield of 3.8% on the current share price of SGD1.61. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Sheng Siong Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Sheng Siong Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sheng Siong Group is paying out an acceptable 70% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Sheng Siong Group generated enough free cash flow to afford its dividend. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Sheng Siong Group'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Sheng Siong Group's earnings per share have been growing at 13% a year for the past five years. Sheng Siong Group is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.