CDW Holding Limited (SGX:BXE) is about to trade ex-dividend in the next 4 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase CDW Holding's shares on or after the 8th of May will not receive the dividend, which will be paid on the 21st of May.

The company's next dividend payment will be US$0.007 per share, and in the last 12 months, the company paid a total of US$0.012 per share. Calculating the last year's worth of payments shows that CDW Holding has a trailing yield of 9.5% on the current share price of S$0.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether CDW Holding can afford its dividend, and if the dividend could grow.

Check out our latest analysis for CDW Holding

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. CDW Holding's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 28% of its free cash flow in the past year.

Click here to see how much of its profit CDW Holding paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. CDW Holding was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CDW Holding's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring.

Get our latest analysis on CDW Holding's balance sheet health here.

The Bottom Line

Is CDW Holding worth buying for its dividend? It's hard to get used to CDW Holding paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. 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 not all that optimistic on its dividend prospects.

In light of that, while CDW Holding has an appealing dividend, it's worth knowing the risks involved with this stock. For example - CDW Holding has 4 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.