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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Boustead Singapore Limited (SGX:F9D) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 1st of August will not receive this dividend, which will be paid on the 19th of September.
Boustead Singapore's upcoming dividend is S$0.02 a share, following on from the last 12 months, when the company distributed a total of S$0.03 per share to shareholders. Looking at the last 12 months of distributions, Boustead Singapore has a trailing yield of approximately 3.8% on its current stock price of SGD0.8. If you buy this business for its dividend, you should have an idea of whether Boustead Singapore's dividend is reliable and sustainable. So we need to investigate whether Boustead Singapore can afford its dividend, and if the dividend could grow.
View our latest analysis for Boustead Singapore
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. Boustead Singapore paid out a comfortable 45% of its profit last year. 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. It paid out an unsustainably high 205% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Boustead Singapore is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Boustead Singapore does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
While Boustead Singapore's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Boustead Singapore's ability to maintain its dividend.
Click here to see how much of its profit Boustead Singapore paid out over the last 12 months.