Valuetronics Holdings Limited (SGX:BN2) Looks Interesting, And It's About To Pay A Dividend

It looks like Valuetronics Holdings Limited (SGX:BN2) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 22nd of November, you won't be eligible to receive this dividend, when it is paid on the 10th of December.

Valuetronics Holdings's next dividend payment will be S$0.06 per share, and in the last 12 months, the company paid a total of S$0.26 per share. Calculating the last year's worth of payments shows that Valuetronics Holdings has a trailing yield of 5.9% on the current share price of SGD0.765. 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 Valuetronics Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Valuetronics Holdings

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. Valuetronics Holdings paid out a comfortable 43% of its profit last year. 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. Fortunately, it paid out only 27% of its free cash flow in the past year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Valuetronics Holdings earnings per share are up 5.5% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, ten years ago, Valuetronics Holdings has lifted its dividend by approximately 20% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Valuetronics Holdings for the upcoming dividend? Earnings per share have been growing moderately, and Valuetronics Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Valuetronics Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Valuetronics Holdings, and we would prioritise taking a closer look at it.

Curious what other investors think of Valuetronics Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.