Bonvests Holdings Limited (SGX:B28) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Meaning, you will need to purchase Bonvests Holdings' shares before the 11th of May to receive the dividend, which will be paid on the 26th of May.

The company's upcoming dividend is S$0.016 a share, following on from the last 12 months, when the company distributed a total of S$0.016 per share to shareholders. Based on the last year's worth of payments, Bonvests Holdings stock has a trailing yield of around 1.6% on the current share price of SGD0.97. 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 Bonvests Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bonvests Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bonvests Holdings paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether Bonvests Holdings generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.7% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Bonvests Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Bonvests Holdings, with earnings per share up 9.4% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bonvests Holdings has delivered an average of 2.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Bonvests Holdings for the upcoming dividend? Earnings per share have been growing moderately, and Bonvests Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Bonvests Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Bonvests Holdings, and we would prioritise taking a closer look at it.

In light of that, while Bonvests Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Bonvests Holdings is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.