Only Three Days Left To Cash In On QAF's (SGX:Q01) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see QAF Limited (SGX:Q01) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase QAF's shares before the 6th of September in order to receive the dividend, which the company will pay on the 26th of September.

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$0.05 per share to shareholders. Last year's total dividend payments show that QAF has a trailing yield of 6.1% on the current share price of S$0.825. 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.

See our latest analysis for QAF

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. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 83% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 QAF paid out over the last 12 months.

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. It's encouraging to see QAF has grown its earnings rapidly, up 34% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. QAF's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Has QAF got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see QAF's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 82% and 83% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of QAF's dividend merits.

Keen to explore more data on QAF's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.