It looks like Brewin Dolphin Holdings PLC (LON:BRW) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 7th of January will not receive the dividend, which will be paid on the 10th of February.
Brewin Dolphin Holdings's next dividend payment will be UK£0.099 per share. Last year, in total, the company distributed UK£0.14 to shareholders. Last year's total dividend payments show that Brewin Dolphin Holdings has a trailing yield of 4.7% on the current share price of £3.05. If you buy this business for its dividend, you should have an idea of whether Brewin Dolphin Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Brewin Dolphin Holdings's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Brewin Dolphin Holdings has lifted its dividend by approximately 7.3% a year on average.
The Bottom Line
Should investors buy Brewin Dolphin Holdings for the upcoming dividend? Brewin Dolphin Holdings's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. Brewin Dolphin Holdings doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
So if you're still interested in Brewin Dolphin Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for Brewin Dolphin Holdings and you should be aware of it before buying any shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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