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Jardine Cycle & Carriage Limited (SGX:C07) is about to trade ex-dividend in the next four 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Jardine Cycle & Carriage's shares before the 3rd of September to receive the dividend, which will be paid on the 4th of October.
The company's upcoming dividend is US$0.28 a share, following on from the last 12 months, when the company distributed a total of US$1.18 per share to shareholders. Based on the last year's worth of payments, Jardine Cycle & Carriage stock has a trailing yield of around 5.5% on the current share price of S$27.68. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Jardine Cycle & Carriage
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Jardine Cycle & Carriage paying out a modest 44% of its earnings. 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. Fortunately, it paid out only 31% of its free cash flow in the past year.
It's positive to see that Jardine Cycle & Carriage'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Jardine Cycle & Carriage's earnings have been skyrocketing, up 20% per annum for the past five years. Jardine Cycle & Carriage is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.