Brickworks (ASX:BKW) Is Paying Out A Larger Dividend Than Last Year
Brickworks Limited (ASX:BKW) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of November to A$0.42. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.
View our latest analysis for Brickworks
Brickworks' Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Brickworks is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Looking forward, earnings per share is forecast to fall by 36.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 40%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Brickworks Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was A$0.405 in 2013, and the most recent fiscal year payment was A$0.65. This means that it has been growing its distributions at 4.8% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Brickworks has been growing its earnings per share at 17% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Brickworks' prospects of growing its dividend payments in the future.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Brickworks' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Brickworks has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated 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.
