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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 Brookfield Infrastructure Corporation (NYSE:BIPC) is about to go ex-dividend in just 4 days. Investors can purchase shares before the 28th of August in order to be eligible for this dividend, which will be paid on the 30th of September.
Brookfield Infrastructure's upcoming dividend is US$0.48 a share, following on from the last 12 months, when the company distributed a total of US$1.94 per share to shareholders. Based on the last year's worth of payments, Brookfield Infrastructure stock has a trailing yield of around 3.8% on the current share price of $51.41. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Brookfield Infrastructure has been able to grow its dividends, or if the dividend might be cut.
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. Brookfield Infrastructure 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. 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 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. It distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.
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.
This is Brookfield Infrastructure's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
We update our analysis on Brookfield Infrastructure every 24 hours, so you can always get the latest insights on its financial health, here.
Is Brookfield Infrastructure an attractive dividend stock, or better left on the shelf? 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." In summary, while it has some positive characteristics, we're not inclined to race out and buy Brookfield Infrastructure today.
If you want to look further into Brookfield Infrastructure, it's worth knowing the risks this business faces. Be aware that Brookfield Infrastructure is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
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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