It looks like Singapore Exchange Limited (SGX:S68) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Meaning, you will need to purchase Singapore Exchange’s shares before the 12th of October to receive the dividend, which will be paid on the 20th of October.

The company’s next dividend payment will be S$0.085 per share, and in the last 12 months, the company paid a total of S$0.34 per share. Looking at the last 12 months of distributions, Singapore Exchange has a trailing yield of approximately 3.5% on its current stock price of SGD9.77. 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 Singapore Exchange

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. Singapore Exchange is paying out an acceptable 61% of its profit, a common payout level among most companies.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re encouraged by the steady growth at Singapore Exchange, with earnings per share up 9.5% on average over the last five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Singapore Exchange has delivered an average of 2.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

From a dividend perspective, should investors buy or avoid Singapore Exchange? Singapore Exchange has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re on the fence about its dividend prospects.

However if you’re still interested in Singapore Exchange as a potential investment, you should definitely consider some of the risks involved with Singapore Exchange. For example, we’ve found 1 warning sign for Singapore Exchange that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.