Is it worth considering Singapore Exchange Limited (SGX:S68) for its upcoming dividend?

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Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Singapore Stock Exchange Limited (SGX:S68) is set to trade ex-dividend in the next 3 days. Generally, the ex-dividend date is one business day before the record date which is the date a company determines which shareholders are eligible to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled by the record date. So, you can buy shares of Singapore Exchange before October 13 in order to receive the dividend, which the company will pay on October 21.

The company’s next dividend payment will be S$0.08 per share, and over the past 12 months the company has paid a total of S$0.32 per share. Based on the value of last year’s payments, the Singapore Stock Exchange has a yield of 3.4% on the current share price of SGD 9.42. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! That’s why we always have to check if the dividend payouts seem sustainable and if the business is growing.

Check out our latest analysis for Singapore Exchange

Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. It paid out 76% of its earnings as dividends last year, which isn’t unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a downturn in activity. This could become concerning if earnings start to decline.

Companies that pay less in dividends than they earn in profits generally have longer-lasting dividends. The lower the payout ratio, the more leeway the company has before being forced to cut the dividend.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

SGX: S68 Historic Dividend October 9, 2022

Have earnings and dividends increased?

Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. That’s why it’s a relief to see that the Singapore Stock Exchange’s earnings per share have grown by 5.9% annually over the past five years.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, the Singapore Stock Exchange has increased its dividend by around 1.7% per year on average.

The essential

From a dividend perspective, should investors buy or avoid Singapore Exchange? Earnings per share have grown at a reasonable pace, and the company is paying just over half of its earnings in the form of dividends. It doesn’t sound like an exceptional opportunity, but it might be worth a closer look.

Curious to know what other investors think of the Singapore Exchange? See analyst forecasts with this visualization of its historical and future estimated earnings and cash flow.

If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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