Why It Might Not Make Sense To Buy Bridgemarq Real Estate Services Inc. (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 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Bridgemarq Real Estate Services' shares on or after the 27th of March will not receive the dividend, which will be paid on the 30th of April.
The company's next dividend payment will be CA$0.1125 per share. Last year, in total, the company distributed CA$1.35 to shareholders. Last year's total dividend payments show that Bridgemarq Real Estate Services has a trailing yield of 9.6% on the current share price of CA$14.00. If you buy this business for its dividend, you should have an idea of whether Bridgemarq Real Estate Services's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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 distributed an unsustainably high 116% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 100% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
Cash is slightly more important than profit from a dividend perspective, but given Bridgemarq Real Estate Services's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.
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?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Bridgemarq Real Estate Services's earnings per share have been shrinking at 2.4% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Bridgemarq Real Estate Services has lifted its dividend by approximately 2.0% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Bridgemarq Real Estate Services is already paying out 116% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
Final Takeaway
Has Bridgemarq Real Estate Services got what it takes to maintain its dividend payments? It's looking like an unattractive opportunity, with its earnings per share declining, while, paying out an uncomfortably high percentage of both its profits (116%) and cash flow as dividends. This is a clearly suboptimal combination that usually suggests the dividend is at risk of being cut. If not now, then perhaps in the future. It's not that we think Bridgemarq Real Estate Services is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
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. For example, we've found 5 warning signs for Bridgemarq Real Estate Services (4 shouldn't be ignored!) that deserve your attention before investing in the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
