Why It Might Not Make Sense To Buy Bridgemarq Real Estate Services Inc. (TSE:BRE) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bridgemarq Real Estate Services Inc. (TSE:BRE) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase Bridgemarq Real Estate Services' shares before the 27th of September in order to be eligible for the dividend, which will be paid on the 31st of October.

The company's next dividend payment will be CA$0.1125 per share. Last year, in total, the company distributed CA$1.35 to shareholders. Calculating the last year's worth of payments shows that Bridgemarq Real Estate Services has a trailing yield of 9.6% on the current share price of CA$14.00. 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! As a result, readers should always check whether Bridgemarq Real Estate Services has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Bridgemarq Real Estate Services

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 70% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 Bridgemarq Real Estate Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Bridgemarq Real Estate Services's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Bridgemarq Real Estate Services has increased its dividend at approximately 2.0% a year on average.

The Bottom Line

Is Bridgemarq Real Estate Services an attractive dividend stock, or better left on the shelf? While earnings per share are flat, at least Bridgemarq Real Estate Services has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. Bottom line: Bridgemarq Real Estate Services has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Bridgemarq Real Estate Services and want to know more, you'll find it very useful to know what risks this stock faces. We've identified 5 warning signs with Bridgemarq Real Estate Services (at least 3 which make us uncomfortable), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.