Why It Might Not Make Sense To Buy Bridgemarq Real Estate Services Inc. (TSE:BRE) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to trade ex-dividend in the next 3 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Bridgemarq Real Estate Services' shares on or after the 28th of February will not receive the dividend, which will be paid on the 28th of March.
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 9.8% on the current share price of CA$13.76. 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. So we need to investigate whether Bridgemarq Real Estate Services can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Bridgemarq Real Estate Services
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 116% 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. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. 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.
As Bridgemarq Real Estate Services's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. 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. Bridgemarq Real Estate Services has delivered an average of 2.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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
Should investors buy Bridgemarq Real Estate Services for the upcoming dividend? Not only are earnings per share declining, but Bridgemarq Real Estate Services is paying out an uncomfortably high percentage of both its earnings and cashflow to shareholders 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. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
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. Every company has risks, and we've spotted 5 warning signs for Bridgemarq Real Estate Services (of which 4 can't be ignored!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
