Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Singapore Exchange Limited (SGX:S68) is about to go ex-dividend in just two 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Singapore Exchange investors that purchase the stock on or after the 16th of February will not receive the dividend, which will be paid on the 24th of February.

The company's next dividend payment will be S$0.08 per share. Last year, in total, the company distributed S$0.32 to shareholders. Based on the last year's worth of payments, Singapore Exchange stock has a trailing yield of around 3.5% on the current share price of SGD9.19. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Singapore Exchange can afford its dividend, and if the dividend could grow.

Check out 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 paid out 66% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. With that in mind, we're encouraged by the steady growth at Singapore Exchange, with earnings per share up 8.8% 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. Since the start of our data, 10 years ago, Singapore Exchange has lifted its dividend by approximately 1.7% a year on average.

Final Takeaway

Has Singapore Exchange got what it takes to maintain its dividend payments? Singapore Exchange has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

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

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.