Here's Why We're Wary Of Buying Bridgemarq Real Estate Services' (TSE:BRE) For Its Upcoming Dividend
Readers hoping to buy Bridgemarq Real Estate Services Inc. (TSE:BRE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Bridgemarq Real Estate Services investors that purchase the stock on or after the 29th of July will not receive the dividend, which will be paid on the 31st of August.
The company's next dividend payment will be CA$0.11 per share, on the back of last year when the company paid a total of CA$1.35 to shareholders. Calculating the last year's worth of payments shows that Bridgemarq Real Estate Services has a trailing yield of 8.1% on the current share price of CA$16.61. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Bridgemarq Real Estate Services
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bridgemarq Real Estate Services lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Bridgemarq Real Estate Services didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.
Click here to see how much of its profit Bridgemarq Real Estate Services paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Bridgemarq Real Estate Services reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Bridgemarq Real Estate Services dividends are largely the same as they were 10 years ago.
Get our latest analysis on Bridgemarq Real Estate Services's balance sheet health here.
To Sum It Up
Should investors buy Bridgemarq Real Estate Services for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Bridgemarq Real Estate Services has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that in mind though, if the poor dividend characteristics of Bridgemarq Real Estate Services don't faze you, it's worth being mindful of the risks involved with this business. For instance, we've identified 4 warning signs for Bridgemarq Real Estate Services (3 are significant) 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.
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