Overseas education limited (SGX:RQ1) is scheduled to trade ex-dividend in the next three days. The ex-dividend date is one business day before the company's record date, which is the date on which the company determines which shareholders are entitled to receive the dividend. The ex-dividend date is an important date to be aware of, as purchasing stocks after this date may result in delayed settlements that will not show up on the record date. Therefore, overseas education investors who purchased shares after April 30th will not receive the dividend, and the dividend will be paid on May 10th.
The company's upcoming dividend will be S$0.013 per share, following a total distribution of S$0.013 per share to shareholders in the last 12 months. Based on the last year's worth of payments, Overseas Education stock has a yield of approximately 6.3% on the current price of S$0.205. Dividends can be a significant contributor to investment returns for long-term holders, but only if they continue to be paid. So we need to check if the dividends are covered, and if earnings are growing.
Check out our latest analysis on education abroad.
Dividends are typically paid out of company profits, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. The dividend payout ratio is 80% of profits, which means that the majority of profits are distributed as dividends. Future earnings growth may be slower due to relatively limited reinvestment of profits. There may be concerns if revenues start to decline. However, cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if a company generated enough cash to pay its dividend. What's good is that the dividend is well covered by free cash flow, with the company paying out 18% of its cash flow last year.
It's positive to see that Overseas Education's dividend is covered by both profit and cash flow. This usually indicates that the dividend is sustainable, as a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much profit Education Abroad paid out in the last 12 months.
Are profits and dividends growing?
A company without growing earnings can potentially have value, but if you think a company will struggle to grow, then assessing the sustainability of its dividend is even more important. If profits decline and the company is forced to cut its dividend, investors could see the value of their investments explode. It is not encouraging that overseas education revenues have been virtually flat for the past five years. Sure, it's better than falling off a cliff, but the best dividend stocks grow profits significantly over the long term.
Many investors assess a company's dividend performance by evaluating how much its dividend payments have changed over time. Overseas Education's dividends per share have fallen an average of 7.2% per year over the past decade, which is not impressive.
conclusion
From a dividend perspective, should investors buy overseas education or avoid it? The payout ratio appears to be quite conservative, but this means the dividend may be sustainable to some extent suggests. Still, earnings are roughly flat, and the overseas education business is unremarkable from a dividend perspective. It might be worth investigating whether the company is reinvesting in growth projects that could boost its profits and dividends in the future, but we're not too optimistic about its dividend prospects at the moment.
That said, if dividends aren't your biggest concern for teaching abroad, you should know about the other risks this business faces. For example, I found that: Three red flags for overseas education (1 is important!) Worth noting before investing in stocks.
Generally speaking, we don't recommend just buying the first dividend stock you see.Here it is A curated list of interesting stocks with strong dividends.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
