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GuocoLand Limited (SGX:F17) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 31st of October in order to be eligible for this dividend, which will be paid on the 21st of November.
GuocoLand's next dividend payment will be S$0.07 per share. Last year, in total, the company distributed S$0.07 to shareholders. Based on the last year's worth of payments, GuocoLand stock has a trailing yield of around 3.3% on the current share price of SGD2.09. 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! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for GuocoLand
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately GuocoLand's payout ratio is modest, at just 31% of profit. A useful secondary check can be to evaluate whether GuocoLand generated enough free cash flow to afford its dividend. Dividends consumed 65% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that GuocoLand'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 GuocoLand paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see GuocoLand's earnings per share have been shrinking at 3.0% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, GuocoLand has lifted its dividend by approximately 3.4% a year on average.
Final Takeaway
Is GuocoLand an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, while it has some positive characteristics, we're not inclined to race out and buy GuocoLand today.