Sheng Siong Group Ltd (SGX:OV8) Stock Goes Ex-Dividend In Just Three Days

Sheng Siong Group Ltd (SGX:OV8) stock is about to trade ex-dividend in 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Sheng Siong Group's shares on or after the 5th of May, you won't be eligible to receive the dividend, when it is paid on the 19th of May.

The company's next dividend payment will be S$0.031 per share, and in the last 12 months, the company paid a total of S$0.062 per share. Calculating the last year's worth of payments shows that Sheng Siong Group has a trailing yield of 3.5% on the current share price of SGD1.77. If you buy this business for its dividend, you should have an idea of whether Sheng Siong Group's dividend is reliable and sustainable. As a result, readers should always check whether Sheng Siong Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sheng Siong Group

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. Sheng Siong Group paid out more than half (70%) of its earnings last year, which is a regular payout ratio for most companies. 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. Dividends consumed 57% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Sheng Siong Group'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. For this reason, we're glad to see Sheng Siong Group's earnings per share have risen 14% per annum over the last five years. Sheng Siong Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sheng Siong Group has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Sheng Siong Group got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Sheng Siong Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 70% and 57% respectively. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

On that note, you'll want to research what risks Sheng Siong Group is facing. For example, we've found 1 warning sign for Sheng Siong Group that we recommend you consider before investing in the business.

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.