Could Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.
With a five-year payment history and a 8.6% yield, many investors probably find Blue Capital Reinsurance Holdings intriguing. It sure looks interesting on these metrics - but there's always more to the story . When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
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Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. So we need to be form a view on if a company's dividend is sustainable, relative to its net profit after tax. While Blue Capital Reinsurance Holdings pays a dividend, it reported a loss over the last year. When a financial business is loss-making and pays a dividend, the dividend is not covered by profits. Its important that investors assess the quality of the company's assets and whether it can return to generating a positive income.
Remember, you can always get a snapshot of Blue Capital Reinsurance Holdings's latest financial position, by checking our visualisation of its financial health.
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. Blue Capital Reinsurance Holdings has been paying a dividend for the past five years. During the past five-year period, the first annual payment was US$1.20 in 2014, compared to US$0.60 last year. This works out to a decline of approximately 50% over that time.
Dividend Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. In the last five years, Blue Capital Reinsurance Holdings's earnings per share have shrunk at approximately 66% per annum. If earnings continue to decline, the dividend may come under pressure. Every investor should make an assessment of whether the company is taking steps to stabilise the situation.
Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Blue Capital Reinsurance Holdings is paying out a dividend despite reporting a loss; clearly a concern. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. Using these criteria, Blue Capital Reinsurance Holdings looks suboptimal from a dividend investment perspective.
Now, if you want to look closer, it would be worth checking out our free research on Blue Capital Reinsurance Holdings management tenure, salary, and performance.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.