Borouge (ADX:BOROUGE) Has Affirmed Its Dividend Of $0.0794

The board of Borouge plc (ADX:BOROUGE) has announced that it will pay a dividend of $0.0794 per share on the 28th of April. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Borouge

Borouge's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Borouge's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS is forecast to expand by 14.5%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Borouge Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.0216 in 2023 to the most recent total annual payment of $0.0432. This works out to be a compound annual growth rate (CAGR) of approximately 41% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Borouge Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Borouge's earnings per share is up 24% over the past year. This is a good sign, and could set the company up to be a solid dividend payer in the future if it continues. Although earnings per share is up nicely Borouge is paying out 109% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Our Thoughts On Borouge's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Borouge's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Borouge (of which 1 is significant!) you should know about. Is Borouge not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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