It looks like Hong Leong Finance Limited (SGX:S41) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Hong Leong Finance's shares before the 10th of May in order to receive the dividend, which the company will pay on the 27th of May.

The company's next dividend payment will be S$0.083 per share, and in the last 12 months, the company paid a total of S$0.12 per share. Last year's total dividend payments show that Hong Leong Finance has a trailing yield of 4.7% on the current share price of SGD2.57. 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! As a result, readers should always check whether Hong Leong Finance has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hong Leong Finance

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hong Leong Finance is paying out an acceptable 63% 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 how much of its profit Hong Leong Finance 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Hong Leong Finance, with earnings per share up 9.6% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hong Leong Finance's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Is Hong Leong Finance worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you want to look further into Hong Leong Finance, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 1 warning sign with Hong Leong Finance and understanding them should be part of your investment process.

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.