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Readers hoping to buy Sin Heng Heavy Machinery Limited (SGX:BKA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Sin Heng Heavy Machinery's shares before the 16th of May in order to receive the dividend, which the company will pay on the 26th of May.
The company's next dividend payment will be S$0.05 per share, and in the last 12 months, the company paid a total of S$0.05 per share. Calculating the last year's worth of payments shows that Sin Heng Heavy Machinery has a trailing yield of 8.0% on the current share price of S$0.625. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Sin Heng Heavy Machinery can afford its dividend, and if the dividend could grow.
Our free stock report includes 2 warning signs investors should be aware of before investing in Sin Heng Heavy Machinery. Read for free now.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sin Heng Heavy Machinery paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 9.6% of its cash flow last year.
It's positive to see that Sin Heng Heavy Machinery'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.
Check out our latest analysis for Sin Heng Heavy Machinery
Click here to see how much of its profit Sin Heng Heavy Machinery paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Sin Heng Heavy Machinery has grown its earnings rapidly, up 43% a year for the past five years. Sin Heng Heavy Machinery earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'