It looks like ABR Holdings Limited (SGX:533) 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 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.   Accordingly, ABR Holdings investors that purchase the stock on or after the 10th of May will not receive the dividend, which will be paid on the 28th of May.  

The company's upcoming dividend is S$0.01 a share, following on from the last 12 months, when the company distributed a total of S$0.013 per share to shareholders.  Calculating the last year's worth of payments shows that ABR Holdings has a trailing yield of 2.7% on the current share price of S$0.455.    We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose!  As a result, readers should always check whether ABR Holdings has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation.   ABR Holdings paid out 71% of its earnings to investors last year, a normal payout level for most businesses.     Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend.     Luckily it paid out just 13% of its free cash flow last year.    

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

SGX:533 Historic Dividend May 6th 2024

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.     With that in mind, we're encouraged by the steady growth at ABR Holdings, with earnings per share up 5.8% on average over the last five years.        While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders.  If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.    

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth.     ABR Holdings's dividend payments per share have declined at 4.6% per year on average over the past 10 years, which is uninspiring.      It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.  

To Sum It Up

From a dividend perspective, should investors buy or avoid ABR Holdings?      While earnings per share growth has been modest, ABR Holdings's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow.        To summarise, ABR Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.  

In light of that, while ABR Holdings has an appealing dividend, it's worth knowing the risks involved with this stock.     For example, ABR Holdings has 4 warning signs (and 1 which is concerning) 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.