Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that $SIA (C6L.SG)$ is about to go ex-dividend in just three days.  The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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.   In other words, investors can purchase Singapore Airlines' shares before the 9th of December in order to be eligible for the dividend, which will be paid on the 22nd of December.

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$0.20 per share.  Last year's total dividend payments show that Singapore Airlines has a trailing yield of 3.6% on the current share price of SGD5.53.    Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends.  So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Singapore Airlines

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable.   Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth.  We'd be worried about the risk of a drop in earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

SGX:C6L Historic Dividend December 5th 2022

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely.   If earnings fall far enough, the company could be forced to cut its dividend.     With that in mind, we're discomforted by Singapore Airlines's 16% per annum decline in earnings in the past five years.  Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time.     Singapore Airlines's dividend payments are broadly unchanged compared to where they were 10 years ago.   If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Final Takeaway

Should investors buy Singapore Airlines for the upcoming dividend?      We're not overly enthused to see Singapore Airlines's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders.        It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you want to look further into Singapore Airlines, it's worth knowing the risks this business faces.     To that end, you should learn about the 2 warning signs we've spotted with Singapore Airlines (including 1 which is potentially serious).

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.