Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ho Bee Land Limited (SGX:H13) is about to trade ex-dividend in the next 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Ho Bee Land's shares on or after the 9th of May will not receive the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be S$0.10 per share, and in the last 12 months, the company paid a total of S$0.10 per share. Calculating the last year's worth of payments shows that Ho Bee Land has a trailing yield of 3.3% on the current share price of SGD3.01. 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 Ho Bee Land has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Ho Bee Land

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ho Bee Land has a low and conservative payout ratio of just 20% of its income after tax. 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 102% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Ho Bee Land paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Ho Bee Land's ability to maintain its dividend.

Click here to see how much of its profit Ho Bee Land paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Ho Bee Land, with earnings per share up 8.9% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ho Bee Land has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Ho Bee Land got what it takes to maintain its dividend payments? Ho Bee Land delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 102% of its cash flow over the last year, which is a mediocre outcome. In summary, it's hard to get excited about Ho Bee Land from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Ho Bee Land, you should know about the other risks facing this business. Be aware that Ho Bee Land is showing 3 warning signs in our investment analysis, and 2 of those make us uncomfortable...

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.