Be sure to consult with Briscoe Group Limited (NZSE: BGP) before it goes ex-dividend
Readers wishing to buy Briscoe Group Limited (NZSE: BGP) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. This means that you will have to buy Briscoe Group shares by September 20 to receive the dividend, which will be paid on October 14.
The company’s next dividend payment will be NZ $ 0.14 per share, compared to last year when the company paid a total of NZ $ 0.27 to shareholders. Based on the value of last year’s payouts, Briscoe Group has a rolling 3.8% return on the current share price of NZ $ 7.17. If you are buying this company for its dividend, you should know if the Briscoe Group dividend is reliable and sustainable. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.
See our latest analysis for Briscoe Group
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Briscoe Group paid 60% of its profits to investors last year, a normal payout level for most companies. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. Dividends consumed 65% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organizations.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to see how much of its Profit Briscoe Group has paid in the past 12 months.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall enough, the company could be forced to cut its dividend. Luckily for readers, Briscoe Group’s earnings per share have grown 14% per year over the past five years. Briscoe Group has an average payout ratio that suggests a balance between earnings growth and shareholder reward. Given the rapid rate of growth in earnings per share and the current level of payout, there may be a possibility of further dividend increases in the future.
Many investors will assess a company’s dividend performance by evaluating how much dividend payments have changed over time. Briscoe Group has generated dividend growth of 12% per year on average over the past 10 years. It’s great to see earnings per share increasing rapidly over several years, and dividends per share increasing at the same time.
The bottom line
Does the Briscoe Group have what it takes to maintain its dividend payments? It’s good to see profits go up because all of the best dividend-paying stocks increase their profits significantly over the long term. However, we also note that Briscoe Group pays more than half of its earnings and cash flow as profits, which could limit dividend growth if earnings growth slows. In summary, although it has some positive characteristics, we are not inclined to rush in and buy Briscoe Group today.
So even though Briscoe Group looks good from a dividend standpoint, it’s still worth being aware of the risks inherent in this stock. Our analysis shows 1 warning sign for Briscoe Group and you should be aware of this before you buy any stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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