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Brook Crompton Holdings Ltd.'s (SGX:AWC) investors are due to receive a payment of SGD0.02 per share on 30th of May. This payment means the dividend yield will be 3.6%, which is below the average for the industry.
Our free stock report includes 3 warning signs investors should be aware of before investing in Brook Crompton Holdings. Read for free now.
Brook Crompton Holdings' Payment Could Potentially Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Brook Crompton Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 10.7% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 34%, which is definitely feasible to continue.
See our latest analysis for Brook Crompton Holdings
Brook Crompton Holdings' Dividend Has Lacked Consistency
Brook Crompton Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. There hasn't been much of a change in the dividend over the last 8 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Brook Crompton Holdings' EPS has fallen by approximately 11% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Brook Crompton Holdings that investors need to be conscious of moving forward. Is Brook Crompton Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.