Bridgemarq Real Estate Services Inc. (TSE:BRE) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 27th of November to receive the dividend, which will be paid on the 31st of December.
Bridgemarq Real Estate Services's next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$1.35 to shareholders. Looking at the last 12 months of distributions, Bridgemarq Real Estate Services has a trailing yield of approximately 9.2% on its current stock price of CA$14.72. 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! We need to see whether the dividend is covered by earnings and if it's growing.
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. Bridgemarq Real Estate Services paid out 128% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Bridgemarq Real Estate Services fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Bridgemarq Real Estate Services's earnings have been skyrocketing, up 21% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bridgemarq Real Estate Services's dividend payments are broadly unchanged compared to where they were 10 years ago.
To Sum It Up
Is Bridgemarq Real Estate Services worth buying for its dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. To summarise, Bridgemarq Real Estate Services looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So if you want to do more digging on Bridgemarq Real Estate Services, you'll find it worthwhile knowing the risks that this stock faces. To that end, you should learn about the 2 warning signs we've spotted with Bridgemarq Real Estate Services (including 1 which shouldn't be ignored).
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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