Don't Buy Brewin Dolphin Holdings PLC (LON:BRW) For Its Next Dividend Without Doing These Checks

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Brewin Dolphin Holdings PLC (LON:BRW) is about to trade ex-dividend in the next four days. You can purchase shares before the 7th of January in order to receive the dividend, which the company will pay on the 10th of February.

Brewin Dolphin Holdings's next dividend payment will be UK£0.099 per share, and in the last 12 months, the company paid a total of UK£0.14 per share. Looking at the last 12 months of distributions, Brewin Dolphin Holdings has a trailing yield of approximately 4.7% on its current stock price of £3.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Brewin Dolphin Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Brewin Dolphin Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Brewin Dolphin Holdings's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Brewin Dolphin Holdings has delivered 7.3% dividend growth per year on average over the past 10 years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Brewin Dolphin Holdings? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. Brewin Dolphin Holdings doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Although, if you're still interested in Brewin Dolphin Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Case in point: We've spotted 1 warning sign for Brewin Dolphin Holdings you should be aware of.

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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