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It looks like Braime Group PLC (LON:BMT) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Braime Group's shares on or after the 9th of May, you won't be eligible to receive the dividend, when it is paid on the 24th of May.
The company's upcoming dividend is UK£0.095 a share, following on from the last 12 months, when the company distributed a total of UK£0.15 per share to shareholders. Last year's total dividend payments show that Braime Group has a trailing yield of 1.3% on the current share price of UK£11.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Braime Group
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. Braime Group paid out just 9.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 11% of its free cash flow last year.
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 how much of its profit Braime Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Braime Group's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.