Do These 3 Checks Before Buying Brooks Macdonald Group plc (LON:BRK) For Its Upcoming Dividend
It looks like Brooks Macdonald Group plc (LON:BRK) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Brooks Macdonald Group's shares before the 14th of March in order to be eligible for the dividend, which will be paid on the 16th of April.
The company's next dividend payment will be UK£0.29 per share, and in the last 12 months, the company paid a total of UK£0.75 per share. Calculating the last year's worth of payments shows that Brooks Macdonald Group has a trailing yield of 4.3% on the current share price of UK£17.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Brooks Macdonald Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Brooks Macdonald Group distributed an unsustainably high 182% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. It's not encouraging to see that Brooks Macdonald Group's earnings are 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. In the last 10 years, Brooks Macdonald Group has lifted its dividend by approximately 15% a year on average.
To Sum It Up
Has Brooks Macdonald Group got what it takes to maintain its dividend payments? Brooks Macdonald Group's earnings have barely moved in recent times, and the company is paying out a disagreeably high percentage of its earnings; a mediocre combination. Brooks Macdonald Group 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 Brooks Macdonald Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 3 warning signs for Brooks Macdonald Group that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
