Bukit Sembawang Estates Limited (SGX:B61) is about to trade ex-dividend in the next four 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Bukit Sembawang Estates' shares before the 2nd of August to receive the dividend, which will be paid on the 16th of August.

The company's next dividend payment will be S$0.16 per share, on the back of last year when the company paid a total of S$0.16 to shareholders. Looking at the last 12 months of distributions, Bukit Sembawang Estates has a trailing yield of approximately 3.2% on its current stock price of SGD4.98. 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 Bukit Sembawang Estates can afford its dividend, and if the dividend could grow.

View our latest analysis for Bukit Sembawang Estates

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bukit Sembawang Estates has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 10% 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 Bukit Sembawang Estates 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Bukit Sembawang Estates, with earnings per share up 2.7% on average over the last five years. Bukit Sembawang Estates is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bukit Sembawang Estates's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Has Bukit Sembawang Estates got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Bukit Sembawang Estates is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Bukit Sembawang Estates is halfway there. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Bukit Sembawang Estates and understanding them should be part of your investment process.

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.