Brand Architekts Group plc (LON:BAR) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 14th of November will not receive the dividend, which will be paid on the 6th of December.
Brand Architekts Group's next dividend payment will be UK£0.04 per share, and in the last 12 months, the company paid a total of UK£0.07 per share. Last year's total dividend payments show that Brand Architekts Group has a trailing yield of 3.8% on the current share price of £1.725. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Brand Architekts Group is paying out an acceptable 75% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 24% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Brand Architekts Group's earnings have been skyrocketing, up 44% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Brand Architekts Group could have strong prospects for future increases to the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Brand Architekts Group has delivered an average of 1.0% per year annual increase in its dividend, based on the past ten years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
From a dividend perspective, should investors buy or avoid Brand Architekts Group? Brand Architekts Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Brand Architekts Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Brand Architekts Group's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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