Yahoo Finance Hafary Holdings Limited (SGX:5VS) Passed Our Checks, And It's About To Pay A S$0.015 Dividend
It looks like Hafary Holdings Limited (SGX:5VS) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Hafary Holdings investors that purchase the stock on or after the 15th of February will not receive the dividend, which will be paid on the 22nd of February.
The company's upcoming dividend is S$0.015 a share, following on from the last 12 months, when the company distributed a total of S$0.02 per share to shareholders. Looking at the last 12 months of distributions, Hafary Holdings has a trailing yield of approximately 6.5% on its current stock price of S$0.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Hafary 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. Hafary Holdings has a low and conservative payout ratio of just 19% of its income after tax. 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 44% of its free cash flow in the past year.
It's positive to see that Hafary Holdings'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.
Click here to see how much of its profit Hafary Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Hafary Holdings's earnings have been skyrocketing, up 32% per annum for the past five years. Hafary Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hafary Holdings has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
Has Hafary Holdings got what it takes to maintain its dividend payments? Hafary Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Hafary Holdings is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
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.
