Jardine Cycle & Carriage Limited (SGX:C07) is about to trade ex-dividend in the next 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Jardine Cycle & Carriage's shares on or after the 29th of August, you won't be eligible to receive the dividend, when it is paid on the 29th of September.

The company's next dividend payment will be US$0.28 per share, and in the last 12 months, the company paid a total of US$0.90 per share. Calculating the last year's worth of payments shows that Jardine Cycle & Carriage has a trailing yield of 3.7% on the current share price of SGD33.4. If you buy this business for its dividend, you should have an idea of whether Jardine Cycle & Carriage's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Jardine Cycle & Carriage

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Jardine Cycle & Carriage paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether Jardine Cycle & Carriage 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 12% of its cash flow last year.

It's positive to see that Jardine Cycle & Carriage's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Jardine Cycle & Carriage earnings per share are up 5.6% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Jardine Cycle & Carriage has seen its dividend decline 3.1% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Has Jardine Cycle & Carriage got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Jardine Cycle & Carriage 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 Jardine Cycle & Carriage is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Jardine Cycle & Carriage, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Jardine Cycle & Carriage that you should be aware of before investing in their shares.

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.