Borouge (ADX:BOROUGE) Will Pay A Dividend Of $0.079

Borouge plc's (ADX:BOROUGE) investors are due to receive a payment of $0.079 per share on 1st of January. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Borouge

Borouge Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Borouge's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next 12 months is set to see EPS grow by 28.0%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Borouge Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.0216 in 2022 to the most recent total annual payment of $0.0432. This means that it has been growing its distributions at 41% per annum 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. EPS has grown 16% over the last 12 months. This is a good sign, and could set the company up to be a solid dividend payer in the future if it continues. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Borouge Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Borouge that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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