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Dividend Investors: Don't Be Too Quick To Buy The Brink's Company (NYSE:BCO) For Its Upcoming Dividend

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Simply Wall St
·3 min read
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The Brink's Company (NYSE:BCO) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 5th of February will not receive the dividend, which will be paid on the 1st of March.

Brink's's next dividend payment will be US$0.15 per share, and in the last 12 months, the company paid a total of US$0.60 per share. Last year's total dividend payments show that Brink's has a trailing yield of 0.9% on the current share price of $68.13. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Brink's

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Brink's reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 17% of its free cash flow in the last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-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. If earnings fall far enough, the company could be forced to cut its dividend. Brink's was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Brink's has delivered 4.1% dividend growth per year on average over the past 10 years.

Get our latest analysis on Brink's's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Brink's? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Brink's is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Brink's don't faze you, it's worth being mindful of the risks involved with this business. For instance, we've identified 2 warning signs for Brink's (1 can't be ignored) you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.