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Readers hoping to buy The Brink's Company (NYSE:BCO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 5th of November will not receive the dividend, which will be paid on the 1st of December.
Brink's's next dividend payment will be US$0.15 per share, on the back of last year when the company paid a total of US$0.60 to shareholders. Looking at the last 12 months of distributions, Brink's has a trailing yield of approximately 1.4% on its current stock price of $42.83. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Brink's
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. Brink's's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Brink's didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 21% of its free cash flow in the last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. Brink's was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Brink's has increased its dividend at approximately 4.1% a year on average.
We update our analysis on Brink's every 24 hours, so you can always get the latest insights on its financial health, here.