Raffles Medical Group Ltd (SGX:BSL) is set to trade ex-dividend in the next 4 days. Typically, 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. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. This means you will need to buy shares of Raffles Medical Group by May 9 to receive the dividend, which will be paid on May 19.
The upcoming dividend for Raffles Medical Group will put a total of S$0.028 per share in shareholders’ pockets, up from total dividends of S$0.018 last year. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. We therefore need to check whether dividend payments are covered and whether profits are increasing.
Check out our latest analysis for Raffles Medical Group
Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. Raffles Medical Group paid out a comfortable 40% of its profit last year. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. Luckily, it’s only paid out 35% of its free cash flow over the past year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
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 Raffles Medical Group’s earnings per share rising 2.3% a year over the past five years. Recent growth has not been impressive. Still, there are several ways to increase the dividend, and one of them is simply for the company to choose to pay out more of its earnings as dividends.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Raffles Medical Group has recorded dividend growth of 4.4% per year on average over the past 10 years. It’s encouraging to see the company increasing its dividends as earnings rise, suggesting at least some corporate interest in rewarding shareholders.
Is Raffles Medical Group worth buying for its dividend? Earnings per share growth has picked up somewhat and Raffles Medical Group is paying out less than half of its earnings and cash flow in the form of dividends. This is interesting for several reasons, as it suggests that management may be reinvesting heavily in the business, but it also offers the possibility of increasing the dividend over time. It might be nice to see profits growing faster, but Raffles Medical Group is cautious with its dividend payouts and could still perform reasonably well over the long term. Raffles Medical Group seems solid on this analysis overall, and we would definitely consider investigating it further.
Wondering what the future holds for Raffles Medical Group? See the forecasts of the 10 analysts we follow, with this visualization of its historical and future estimated earnings and cash flow
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.
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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.