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Readers hoping to buy Briscoe Group Limited (NZSE:BGP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Briscoe Group's shares before the 24th of September to receive the dividend, which will be paid on the 9th of October.
The company's next dividend payment will be NZ$0.1470588 per share, on the back of last year when the company paid a total of NZ$0.29 to shareholders. Based on the last year's worth of payments, Briscoe Group stock has a trailing yield of around 5.9% on the current share price of NZ$4.95. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Briscoe Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Briscoe Group
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. It paid out 86% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. 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. Dividends consumed 73% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Briscoe Group, with earnings per share up 3.2% on average over the last five years. A high payout ratio of 86% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Briscoe Group could be signalling that its future growth prospects are thin.