Brook Crompton Holdings' (SGX:AWC) Dividend Will Be SGD0.02

Brook Crompton Holdings Ltd. (SGX:AWC) will pay a dividend of SGD0.02 on the 30th of May. This payment means the dividend yield will be 3.1%, which is below the average for the industry.

See our latest analysis for Brook Crompton Holdings

Brook Crompton Holdings' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Brook Crompton Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Unless the company can turn things around, EPS could fall by 10.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 36%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Brook Crompton Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The last annual payment of SGD0.02 was flat on the annual payment from6 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 11% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Brook Crompton Holdings' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Brook Crompton Holdings has 5 warning signs (and 2 which don't sit too well with us) we think you should know about. 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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