Should Income Investors Look At City Developments Limited (SGX:C09) Before Its Ex-Dividend?
City Developments Limited (SGX:C09) stock is about to trade ex-dividend in 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 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. Thus, you can purchase City Developments' shares before the 2nd of May in order to receive the dividend, which the company will pay on the 20th of May.
The company's next dividend payment will be S$0.08 per share, and in the last 12 months, the company paid a total of S$0.10 per share. Calculating the last year's worth of payments shows that City Developments has a trailing yield of 2.0% on the current share price of S$4.99. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
We've discovered 2 warning signs about City Developments. View them for free.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately City Developments's payout ratio is modest, at just 38% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 15% of its free cash flow last year.
It's positive to see that City Developments'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.
See our latest analysis for City Developments
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. City Developments's earnings per share have fallen at approximately 19% a year over the previous 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. City Developments's dividend payments per share have declined at 1.8% per year on average over the past 10 years, which is uninspiring.
From a dividend perspective, should investors buy or avoid City Developments? City Developments has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, City Developments looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks City Developments is facing. For example, City Developments has 2 warning signs (and 1 which is potentially serious) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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