Yahoo Finance Be Sure To Check Out OUE Limited (SGX:LJ3) Before It Goes Ex-Dividend
It looks like OUE Limited (SGX:LJ3) is about to go ex-dividend in the next four 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. Therefore, if you purchase OUE's shares on or after the 16th of May, you won't be eligible to receive the dividend, when it is paid on the 31st of May.
The company's next dividend payment will be S$0.015 per share. Last year, in total, the company distributed S$0.03 to shareholders. Based on the last year's worth of payments, OUE has a trailing yield of 2.6% on the current stock price of SGD1.16. If you buy this business for its dividend, you should have an idea of whether OUE's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for OUE
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. OUE is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether OUE generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 9.6% of its cash flow last year.
It's positive to see that OUE'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.
Click here to see how much of its profit OUE 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. For this reason, we're glad to see OUE's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. OUE's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. OUE is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
From a dividend perspective, should investors buy or avoid OUE? It's great that OUE 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. There's a lot to like about OUE, and we would prioritise taking a closer look at it.
In light of that, while OUE has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for OUE (2 shouldn't be ignored!) that deserve your attention before investing in the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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