Why It Might Not Make Sense To Buy Singapura Finance Ltd (SGX:S23) For Its Upcoming Dividend

Singapura Finance Ltd (SGX:S23) is about to trade ex-dividend in the next three 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Singapura Finance's shares before the 3rd of May in order to be eligible for the dividend, which will be paid on the 10th of May.

The company's next dividend payment will be S$0.03 per share, and in the last 12 months, the company paid a total of S$0.03 per share. Looking at the last 12 months of distributions, Singapura Finance has a trailing yield of approximately 4.2% on its current stock price of S$0.715. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Singapura Finance has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Singapura Finance

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. Singapura Finance is paying out an acceptable 52% 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 Singapura Finance paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Singapura Finance's earnings per share have been shrinking at 4.4% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Singapura Finance's dividend payments per share have declined at 5.0% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Should investors buy Singapura Finance for the upcoming dividend? We're not overly enthused to see Singapura Finance's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in Singapura Finance and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for Singapura Finance that we recommend you consider before investing in the business.

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.