Four Days Left Until HRnetGroup Limited (SGX:CHZ) Trades Ex-Dividend

By
Simply Wall St
Published
December 29, 2021
SGX:CHZ
Source: Shutterstock

It looks like HRnetGroup Limited (SGX:CHZ) is about to go ex-dividend in the next 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, HRnetGroup investors that purchase the stock on or after the 3rd of January will not receive the dividend, which will be paid on the 11th of January.

The company's upcoming dividend is S$0.01 a share, following on from the last 12 months, when the company distributed a total of S$0.025 per share to shareholders. Calculating the last year's worth of payments shows that HRnetGroup has a trailing yield of 3.1% on the current share price of SGD0.805. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether HRnetGroup can afford its dividend, and if the dividend could grow.

Check out our latest analysis for HRnetGroup

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. HRnetGroup paid out a comfortable 41% of its profit last year. A useful secondary check can be to evaluate whether HRnetGroup generated enough free cash flow to afford its dividend. Fortunately, it paid out only 46% of its free cash flow in the past 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
SGX:CHZ Historic Dividend December 29th 2021

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see HRnetGroup earnings per share are up 4.4% per annum over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past four years, HRnetGroup has increased its dividend at approximately 2.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has HRnetGroup got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and HRnetGroup is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and HRnetGroup is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while HRnetGroup looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with HRnetGroup and understanding them should be part of your investment process.

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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