It looks like Brickability Group Plc (LON:BRCK) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 24th of September, you won't be eligible to receive this dividend, when it is paid on the 23rd of October.
Brickability Group's next dividend payment will be UK£0.011 per share. Last year, in total, the company distributed UK£0.017 to shareholders. Last year's total dividend payments show that Brickability Group has a trailing yield of 4.8% on the current share price of £0.45. If you buy this business for its dividend, you should have an idea of whether Brickability Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. That's why it's good to see Brickability Group paying out a modest 41% of its earnings. A useful secondary check can be to evaluate whether Brickability Group generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the 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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. From this perspective, we're disturbed to see earnings per share plunged 100% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.
We'd also point out that Brickability Group issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Given that Brickability Group has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is Brickability Group an attractive dividend stock, or better left on the shelf? Brickability Group has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
On that note, you'll want to research what risks Brickability Group is facing. Every company has risks, and we've spotted 1 warning sign for Brickability Group you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.