Wee Hur Holdings Ltd. (SGX:E3B) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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 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 Wee Hur Holdings' shares before the 21st of August to receive the dividend, which will be paid on the 4th of September.
The company's next dividend payment will be S$0.005 per share, and in the last 12 months, the company paid a total of S$0.015 per share. Based on the last year's worth of payments, Wee Hur Holdings stock has a trailing yield of around 2.3% on the current share price of S$0.66. 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 check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Wee Hur Holdings has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether Wee Hur Holdings generated enough free cash flow to afford its dividend. The good news is it paid out just 8.1% of its free cash flow in the last year.
It's positive to see that Wee Hur 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.
View our latest analysis for Wee Hur Holdings
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Wee Hur Holdings's earnings have been skyrocketing, up 25% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Wee Hur Holdings looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wee Hur Holdings's dividend payments are effectively flat on where they were 10 years ago.
The Bottom Line
Has Wee Hur Holdings got what it takes to maintain its dividend payments? It's great that Wee Hur Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while Wee Hur Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 3 warning signs for Wee Hur Holdings (1 is significant) you should be aware of.
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.