Be Sure To Check Out Brook Crompton Holdings Ltd. (SGX:AWC) Before It Goes Ex-Dividend

It looks like Brook Crompton Holdings Ltd. (SGX:AWC) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Brook Crompton Holdings' shares on or after the 10th of May will not receive the dividend, which will be paid on the 30th of May.

The company's next dividend payment will be S$0.02 per share, and in the last 12 months, the company paid a total of S$0.02 per share. Based on the last year's worth of payments, Brook Crompton Holdings has a trailing yield of 3.6% on the current stock price of S$0.555. 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! So we need to investigate whether Brook Crompton Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Brook Crompton Holdings

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. Brook Crompton Holdings is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 12% of its free cash flow in the last year.

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 Brook Crompton Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Brook Crompton Holdings, with earnings per share up 2.9% on average over the last five years. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Brook Crompton Holdings dividends are largely the same as they were seven years ago.

Final Takeaway

Is Brook Crompton Holdings an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Brook Crompton Holdings 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 significant earnings per share growth with a low payout ratio, and Brook Crompton Holdings is halfway there. There's a lot to like about Brook Crompton Holdings, and we would prioritise taking a closer look at it.

In light of that, while Brook Crompton Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for Brook Crompton Holdings (1 is a bit concerning!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.