Brickability Group's (LON:BRCK) Upcoming Dividend Will Be Larger Than Last Year's

The board of Brickability Group Plc (LON:BRCK) has announced that it will be increasing its dividend by 5.2% on the 23rd of February to £0.0101, up from last year's comparable payment of £0.0096. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Brickability Group

Brickability Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Brickability Group's dividend was only 48% of earnings, however it was paying out 114% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 13.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 75%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Brickability Group Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of £0.0174 in 2020 to the most recent total annual payment of £0.0305. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Brickability Group has impressed us by growing EPS at 163% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Brickability Group is earning enough to cover the payments, the cash flows are lacking. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Brickability Group 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.