It looks like Azeus Systems Holdings Ltd. (SGX:BBW) is about to go ex-dividend in the next 3 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Azeus Systems Holdings' shares before the 17th of October to receive the dividend, which will be paid on the 31st of October.

The company's upcoming dividend is HK$1.62 a share, following on from the last 12 months, when the company distributed a total of HK$1.62 per share to shareholders. Calculating the last year's worth of payments shows that Azeus Systems Holdings has a trailing yield of 4.1% on the current share price of SGD7.15. If you buy this business for its dividend, you should have an idea of whether Azeus Systems Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Azeus Systems Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Azeus Systems Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Azeus Systems Holdings paid out 100% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Azeus Systems Holdings fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Azeus Systems Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Azeus Systems Holdings's earnings have been skyrocketing, up 59% 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. In the past 10 years, Azeus Systems Holdings has increased its dividend at approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Azeus Systems Holdings got what it takes to maintain its dividend payments? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Azeus Systems Holdings is paying out so much of its profit. Overall, it's hard to get excited about Azeus Systems Holdings from a dividend perspective.

On that note, you'll want to research what risks Azeus Systems Holdings is facing. For example, Azeus Systems Holdings has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.