Should You Buy Braime Group PLC (LON:BMT) For Its Upcoming Dividend?

Braime Group PLC (LON:BMT) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Braime Group's shares before the 9th of May in order to receive the dividend, which the company will pay on the 24th of May.

The company's upcoming dividend is UK£0.095 a share, following on from the last 12 months, when the company distributed a total of UK£0.15 per share to shareholders. Based on the last year's worth of payments, Braime Group stock has a trailing yield of around 1.3% on the current share price of UK£11.50. If you buy this business for its dividend, you should have an idea of whether Braime Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Braime Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Braime Group has a low and conservative payout ratio of just 9.3% of its income after tax. A useful secondary check can be to evaluate whether Braime Group generated enough free cash flow to afford its dividend. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

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 Braime Group 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Braime Group's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Braime Group has lifted its dividend by approximately 5.5% a year on average.

Final Takeaway

Is Braime Group an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Braime Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Braime Group is halfway there. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Braime Group has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Braime Group has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.