Be Sure To Check Out Bukit Sembawang Estates Limited (SGX:B61) Before It Goes Ex-Dividend

Bukit Sembawang Estates Limited (SGX:B61) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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 Bukit Sembawang Estates' shares on or after the 1st of August, you won't be eligible to receive the dividend, when it is paid on the 15th of August.

The company's next dividend payment will be S$0.20 per share, and in the last 12 months, the company paid a total of S$0.20 per share. Calculating the last year's worth of payments shows that Bukit Sembawang Estates has a trailing yield of 4.5% on the current share price of S$4.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Bukit Sembawang Estates has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bukit Sembawang Estates is paying out just 9.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Bukit Sembawang Estates generated enough free cash flow to afford its dividend. Luckily it paid out just 6.0% of its free cash flow last year.

It's positive to see that Bukit Sembawang Estates'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.

Check out our latest analysis for Bukit Sembawang Estates

Click here to see how much of its profit Bukit Sembawang Estates paid out over the last 12 months.

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. This is why it's a relief to see Bukit Sembawang Estates earnings per share are up 8.5% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bukit Sembawang Estates has seen its dividend decline 4.9% per annum on average over the past 10 years, which is not great to see. Bukit Sembawang Estates 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 Bukit Sembawang Estates an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Bukit Sembawang Estates is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Bukit Sembawang Estates is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Bukit Sembawang Estates has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.