Big River Industries (ASX:BRI) Is Paying Out Less In Dividends Than Last Year

Big River Industries Limited (ASX:BRI) has announced that on 4th of October, it will be paying a dividend ofA$0.02, which a reduction from last year's comparable dividend. The dividend yield of 5.4% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Big River Industries

Big River Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Big River Industries' dividend made up quite a large proportion of earnings but only 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 84.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 52% which brings it into quite a comfortable range.

Big River Industries' Dividend Has Lacked Consistency

Big River Industries has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was A$0.035, compared to the most recent full-year payment of A$0.075. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Big River Industries has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Big River Industries' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Big River Industries has seen EPS rising for the last five years, at 5.4% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Big River Industries' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Big River Industries that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.