Is It Smart To Buy Singapore Exchange Limited (SGX:S68) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Singapore Exchange Limited (SGX:S68) is about to trade ex-dividend in the next two 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. This means that investors who purchase Singapore Exchange's shares on or after the 8th 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$0.09 per share. Last year, in total, the company distributed S$0.36 to shareholders. Last year's total dividend payments show that Singapore Exchange has a trailing yield of 2.5% on the current share price of S$14.34. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Singapore Exchange paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

View our latest analysis for Singapore Exchange

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Singapore Exchange's earnings per share have been growing at 11% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Singapore Exchange has delivered an average of 2.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Should investors buy Singapore Exchange for the upcoming dividend? Earnings per share are growing at an attractive rate, and Singapore Exchange is paying out a bit over half its profits. Singapore Exchange ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Wondering what the future holds for Singapore Exchange? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.