Big River Industries (ASX:BRI) Is Paying Out A Dividend Of A$0.02

The board of Big River Industries Limited (ASX:BRI) has announced that it will pay a dividend of A$0.02 per share on the 7th of October. The dividend yield is 2.7% based on this payment, which is a little bit low compared to the other companies in the industry.

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Estimates Indicate Big River Industries' Dividend Coverage Likely To Improve

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Big River Industries is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 5.9%, which makes us pretty comfortable with the sustainability of the dividend.

View our latest analysis for Big River Industries

Big River Industries' Dividend Has Lacked Consistency

Big River Industries has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of A$0.035 in 2017 to the most recent total annual payment of A$0.04. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 15% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Big River Industries that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.