Four Days Left To Buy Valuetronics Holdings Limited (SGX:BN2) Before The Ex-Dividend Date

Valuetronics Holdings Limited (SGX:BN2) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Valuetronics Holdings investors that purchase the stock on or after the 8th of August will not receive the dividend, which will be paid on the 22nd of August.

The upcoming dividend for Valuetronics Holdings will put a total of HK$0.16 per share in shareholders' pockets, up from last year's total dividends of HK$0.14. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Valuetronics Holdings

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. Fortunately Valuetronics Holdings's payout ratio is modest, at just 48% of profit. A useful secondary check can be to evaluate whether Valuetronics Holdings generated enough free cash flow to afford its dividend. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Valuetronics Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Valuetronics Holdings's earnings per share have fallen at approximately 9.2% a year over the previous 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. In the past 10 years, Valuetronics Holdings has increased its dividend at approximately 6.8% a year on average.

Final Takeaway

Is Valuetronics Holdings worth buying for its dividend? Valuetronics Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Valuetronics Holdings's dividend merits.

In light of that, while Valuetronics Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Valuetronics Holdings 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.