Is It Smart To Buy Hafary Holdings Limited (SGX:5VS) Before It Goes Ex-Dividend?

Hafary Holdings Limited (SGX:5VS) stock is about to trade ex-dividend in 4 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 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. Thus, you can purchase Hafary Holdings' shares before the 27th of February in order to receive the dividend, which the company will pay on the 7th of March.

The company's next dividend payment will be S$0.015 per share, on the back of last year when the company paid a total of S$0.015 to shareholders. Calculating the last year's worth of payments shows that Hafary Holdings has a trailing yield of 5.7% on the current share price of SGD0.265. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Hafary Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hafary Holdings paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Hafary Holdings generated enough free cash flow to afford its dividend. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Hafary Holdings'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 how much of its profit Hafary Holdings 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. That's why it's comforting to see Hafary Holdings's earnings have been skyrocketing, up 27% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hafary Holdings's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Hafary Holdings worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Hafary Holdings paid out less than half its earnings and a bit over half its free cash flow. Hafary Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Hafary Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Hafary Holdings that we strongly recommend you have a look at before investing in the company.

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.

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