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Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 25th of February will not receive this dividend, which will be paid on the 31st of March.
Bridgemarq Real Estate Services's next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$1.35 to shareholders. Based on the last year's worth of payments, Bridgemarq Real Estate Services has a trailing yield of 8.9% on the current stock price of CA$15.22. 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.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Bridgemarq Real Estate Services paid out 128% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Bridgemarq Real Estate Services fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Bridgemarq Real Estate Services has grown its earnings rapidly, up 21% a year for the past five years.
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's dividend payments are effectively flat on where they were 10 years ago.
Is Bridgemarq Real Estate Services worth buying for its dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall, it's hard to get excited about Bridgemarq Real Estate Services from a dividend perspective.
If you want to look further into Bridgemarq Real Estate Services, it's worth knowing the risks this business faces. We've identified 3 warning signs with Bridgemarq Real Estate Services (at least 2 which are significant), and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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