Yahoo Finance Be Sure To Check Out Sembcorp Industries Ltd (SGX:U96) Before It Goes Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sembcorp Industries Ltd (SGX:U96) is about to trade ex-dividend in the next two days. The ex-dividend date is usually set to be one business day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Sembcorp Industries' shares on or after the 29th of April will not receive the dividend, which will be paid on the 9th of May.
The company's upcoming dividend is S$0.08 a share, following on from the last 12 months, when the company distributed a total of S$0.16 per share to shareholders. Looking at the last 12 months of distributions, Sembcorp Industries has a trailing yield of approximately 2.9% on its current stock price of S$5.45. 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.
View our latest analysis for Sembcorp Industries
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. Sembcorp Industries paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Sembcorp Industries generated enough free cash flow to afford its dividend. Luckily it paid out just 25% of its free cash flow last year.
It's positive to see that Sembcorp Industries'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Sembcorp Industries has grown its earnings rapidly, up 27% a year for the past five years. Sembcorp Industries looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Sembcorp Industries has lifted its dividend by approximately 0.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sembcorp Industries is keeping back more of its profits to grow the business.
To Sum It Up
Is Sembcorp Industries worth buying for its dividend? It's great that Sembcorp Industries is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Sembcorp Industries has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Sembcorp Industries that we strongly recommend you have a look at before investing in the company.
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.
