Is It Smart To Buy Boustead Singapore Limited (SGX:F9D) Before It Goes Ex-Dividend?

By
Simply Wall St
Published
November 15, 2021
SGX:F9D
Source: Shutterstock

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 Boustead Singapore Limited (SGX:F9D) is about to go ex-dividend in just three days. The ex-dividend date occurs one day 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. Accordingly, Boustead Singapore investors that purchase the stock on or after the 19th of November will not receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be S$0.015 per share. Last year, in total, the company distributed S$0.04 to shareholders. Calculating the last year's worth of payments shows that Boustead Singapore has a trailing yield of 3.9% on the current share price of SGD1.02. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Boustead Singapore can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Boustead Singapore

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Boustead Singapore 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. Over the last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Boustead Singapore paid out over the last 12 months.

historic-dividend
SGX:F9D Historic Dividend November 15th 2021

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Boustead Singapore has grown its earnings rapidly, up 34% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Boustead Singapore has seen its dividend decline 5.4% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Is Boustead Singapore worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Boustead Singapore, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Boustead Singapore is facing. To help with this, we've discovered 3 warning signs for Boustead Singapore (2 are a bit unpleasant!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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