Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Singapore Exchange Limited (SGX:S68) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Singapore Exchange’s shares on or after the 7th of November will not receive the dividend, which will be paid on the 15th of November.
The company’s next dividend payment will be S$0.09 per share, and in the last 12 months, the company paid a total of S$0.36 per share. Calculating the last year’s worth of payments shows that Singapore Exchange has a trailing yield of 3.2% on the current share price of S$11.41. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether Singapore Exchange can afford its dividend, and if the dividend could grow.
See our latest analysis for Singapore Exchange
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. Singapore Exchange is paying out an acceptable 62% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it’s a relief to see Singapore Exchange earnings per share are up 8.8% per annum over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Singapore Exchange has increased its dividend at approximately 2.5% 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.
