Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 29th of October will not receive this dividend, which will be paid on the 30th of November.
Bridgemarq Real Estate Services's next dividend payment will be CA$0.11 per share, and in the last 12 months, the company paid a total of CA$1.35 per share. Last year's total dividend payments show that Bridgemarq Real Estate Services has a trailing yield of 9.6% on the current share price of CA$14.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 87% 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 concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (60%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Bridgemarq Real Estate Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Bridgemarq Real Estate Services has grown its earnings rapidly, up 31% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Bridgemarq Real Estate Services dividends are largely the same as they were 10 years ago.
To Sum It Up
Has Bridgemarq Real Estate Services got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Bridgemarq Real Estate Services's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 87% and 60% respectively. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
In light of that, while Bridgemarq Real Estate Services has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Bridgemarq Real Estate Services is showing 3 warning signs in our investment analysis, and 1 of those is concerning...
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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