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Brooks Macdonald Group plc (LON:BRK) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 26th of September will not receive the dividend, which will be paid on the 8th of November.
Brooks Macdonald Group's upcoming dividend is UK£0.3 a share, following on from the last 12 months, when the company distributed a total of UK£0.5 per share to shareholders. Calculating the last year's worth of payments shows that Brooks Macdonald Group has a trailing yield of 2.6% on the current share price of £19.75. If you buy this business for its dividend, you should have an idea of whether Brooks Macdonald Group's dividend is reliable and sustainable. As a result, readers should always check whether Brooks Macdonald Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Brooks Macdonald Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Brooks Macdonald Group distributed an unsustainably high 114% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Brooks Macdonald Group's 8.4% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Brooks Macdonald Group has delivered an average of 25% per year annual increase in its dividend, based on the past ten years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Brooks Macdonald Group is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
To Sum It Up
From a dividend perspective, should investors buy or avoid Brooks Macdonald Group? Not only are earnings per share shrinking, but Brooks Macdonald Group is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.