Read This Before Considering Ho Bee Land Limited (SGX:H13) For Its Upcoming S$0.04 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ho Bee Land Limited (SGX:H13) is about to trade ex-dividend in the next 4 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Ho Bee Land's shares before the 13th of May in order to be eligible for the dividend, which will be paid on the 23rd of May.

The company's upcoming dividend is S$0.04 a share, following on from the last 12 months, when the company distributed a total of S$0.04 per share to shareholders. Based on the last year's worth of payments, Ho Bee Land stock has a trailing yield of around 2.2% on the current share price of S$1.82. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Ho Bee Land has been able to grow its dividends, or if the dividend might be cut.

Our free stock report includes 2 warning signs investors should be aware of before investing in Ho Bee Land. Read for free now.

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. Ho Bee Land paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 7.1% of its free cash flow as dividends last year, which is conservatively low.

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.

Check out our latest analysis for Ho Bee Land

Click here to see how much of its profit Ho Bee Land paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Ho Bee Land's 20% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ho Bee Land's dividend payments per share have declined at 2.2% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Has Ho Bee Land got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Ho Bee Land looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while Ho Bee Land has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Ho Bee Land that we recommend you consider before investing in the business.

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.

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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.