Valuetronics Holdings Limited (SGX:BN2) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Valuetronics Holdings' shares on or after the 8th of August will not receive the dividend, which will be paid on the 23rd of August.

The company's upcoming dividend is HK$0.17 a share, following on from the last 12 months, when the company distributed a total of HK$0.25 per share to shareholders. Based on the last year's worth of payments, Valuetronics Holdings stock has a trailing yield of around 6.7% on the current share price of S$0.635. If you buy this business for its dividend, you should have an idea of whether Valuetronics Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Valuetronics Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Valuetronics Holdings

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. Valuetronics Holdings paid out a comfortable 34% of its profit last year. A useful secondary check can be to evaluate whether Valuetronics Holdings generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Valuetronics Holdings's earnings per share have been shrinking at 3.3% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Valuetronics Holdings has increased its dividend at approximately 5.6% a year on average.