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Micro-Mechanics (Holdings) Ltd. (SGX:5DD) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 6th of November to receive the dividend, which will be paid on the 19th of November.
Micro-Mechanics (Holdings)'s next dividend payment will be S$0.06 per share, and in the last 12 months, the company paid a total of S$0.1 per share. Looking at the last 12 months of distributions, Micro-Mechanics (Holdings) has a trailing yield of approximately 5.4% on its current stock price of SGD1.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Micro-Mechanics (Holdings) can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Micro-Mechanics (Holdings)
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Micro-Mechanics (Holdings) paid out 97% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's good to see that while Micro-Mechanics (Holdings)'s dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.
Click here to see how much of its profit Micro-Mechanics (Holdings) 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. Fortunately for readers, Micro-Mechanics (Holdings)'s earnings per share have been growing at 11% a year for the past 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, Micro-Mechanics (Holdings) has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.