Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see LHT Holdings Limited (SGX:BEI) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase LHT Holdings' shares before the 16th of May to receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be S$0.05 per share, and in the last 12 months, the company paid a total of S$0.05 per share. Based on the last year's worth of payments, LHT Holdings has a trailing yield of 6.4% on the current stock price of SGD0.78. 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 LHT Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for LHT Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. LHT Holdings paid out a comfortable 48% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.
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 LHT Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. LHT Holdings's earnings per share have fallen at approximately 5.8% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, LHT Holdings has lifted its dividend by approximately 9.6% a year on average.
The Bottom Line
From a dividend perspective, should investors buy or avoid LHT Holdings? LHT Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about LHT Holdings from a dividend perspective.
So while LHT Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we've spotted with LHT Holdings (including 1 which shouldn't be ignored).
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.