Is It Smart To Buy Soilbuild Construction Group Ltd. (SGX:V5Q) Before It Goes Ex-Dividend?

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 Soilbuild Construction Group Ltd. (SGX:V5Q) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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, Soilbuild Construction Group investors that purchase the stock on or after the 6th of May will not receive the dividend, which will be paid on the 19th of May.

The company's next dividend payment will be S$0.02 per share. Last year, in total, the company distributed S$0.02 to shareholders. Calculating the last year's worth of payments shows that Soilbuild Construction Group has a trailing yield of 2.4% on the current share price of S$0.82. 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 check whether the dividend payments are covered, and if earnings are growing.

We've discovered 1 warning sign about Soilbuild Construction Group. View them for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Soilbuild Construction Group has a low and conservative payout ratio of just 12% of its income after tax. A useful secondary check can be to evaluate whether Soilbuild Construction Group generated enough free cash flow to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

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.

Check out our latest analysis for Soilbuild Construction Group

Click here to see how much of its profit Soilbuild Construction Group paid out over the last 12 months.

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. That's why it's comforting to see Soilbuild Construction Group's earnings have been skyrocketing, up 39% per annum for the past five years. Soilbuild Construction Group 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.'

Soilbuild Construction Group also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Soilbuild Construction Group's dividend payments per share have declined at 15% per year on average over the past 10 years, which is uninspiring. Soilbuild Construction Group is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Soilbuild Construction Group an attractive dividend stock, or better left on the shelf? Soilbuild Construction Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Soilbuild Construction Group for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Soilbuild Construction Group that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.