Yahoo Finance Brook Crompton Holdings Ltd. (SGX:AWC) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Brook Crompton Holdings Ltd. (SGX:AWC) is about to trade ex-dividend in the next three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Brook Crompton Holdings' shares on or after the 10th of May will not receive the dividend, which will be paid on the 30th of May.
The company's next dividend payment will be S$0.02 per share, on the back of last year when the company paid a total of S$0.02 to shareholders. Last year's total dividend payments show that Brook Crompton Holdings has a trailing yield of 3.6% on the current share price of S$0.55. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Brook Crompton Holdings
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. Brook Crompton Holdings has a low and conservative payout ratio of just 17% of its income after tax. A useful secondary check can be to evaluate whether Brook Crompton Holdings generated enough free cash flow to afford its dividend. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.
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 Brook Crompton Holdings paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Brook Crompton Holdings earnings per share are up 2.9% per annum over the last five years. 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.
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 Brook Crompton Holdings dividends are largely the same as they were seven years ago.
Final Takeaway
Should investors buy Brook Crompton Holdings for the upcoming dividend? Earnings per share growth has been growing somewhat, and Brook Crompton Holdings is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Brook Crompton Holdings is halfway there. Brook Crompton Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Brook Crompton Holdings for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Brook Crompton Holdings (1 is a bit concerning!) that deserve your attention before investing in the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
