Here's Why We're Wary Of Buying Bridgemarq Real Estate Services' (TSE:BRE) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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 28th of October will not receive the dividend, which will be paid on the 30th of November.
The company's next dividend payment will be CA$0.11 per share, and in the last 12 months, the company paid a total of CA$1.35 per share. Last year's total dividend payments show that Bridgemarq Real Estate Services has a trailing yield of 7.8% on the current share price of CA$17.34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Bridgemarq Real Estate Services can afford its dividend, and if the dividend could grow.
View 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 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. 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 more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Bridgemarq Real Estate Services 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bridgemarq Real Estate Services has delivered 2.1% dividend growth per year on average over the past 10 years.
We update our analysis on Bridgemarq Real Estate Services every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
Has Bridgemarq Real Estate Services got what it takes to maintain its dividend payments? It's hard to get used to Bridgemarq Real Estate Services paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Although, if you're still interested in Bridgemarq Real Estate Services and want to know more, you'll find it very useful to know what risks this stock faces. We've identified 4 warning signs with Bridgemarq Real Estate Services (at least 3 which are concerning), and understanding them should be part of your investment process.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
