Briscoe Group (NZSE:BGP) Is Paying Out A Larger Dividend Than Last Year

Briscoe Group Limited (NZSE:BGP) has announced that it will be increasing its dividend on the 31st of March to NZ$0.18. This will take the dividend yield from 4.5% to 8.3%, providing a nice boost to shareholder returns.

View our latest analysis for Briscoe Group

Briscoe Group Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Briscoe Group's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 78% indicates it is more focused on returning cash to shareholders than growing the business.

Earnings per share could rise by 7.8% over the next year if things go the same way as they have for the last few years. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 123% over the next year.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was NZ$0.10 in 2012, and the most recent fiscal year payment was NZ$0.27. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

We Could See Briscoe Group's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Briscoe Group has been growing its earnings per share at 7.8% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Briscoe Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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