Brook Crompton Holdings (SGX:AWC) Will Pay A Dividend Of SGD0.02

The board of Brook Crompton Holdings Ltd. (SGX:AWC) has announced that it will pay a dividend of SGD0.02 per share on the 30th of May. Including this payment, the dividend yield on the stock will be 3.6%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Brook Crompton Holdings

Brook Crompton Holdings' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Brook Crompton Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 2.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Brook Crompton Holdings' Dividend Has Lacked Consistency

It's comforting to see that Brook Crompton Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The last annual payment of SGD0.02 was flat on the annual payment from7 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

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. However, Brook Crompton Holdings has only grown its earnings per share at 2.9% per annum over the past five years. While growth may be thin on the ground, Brook Crompton Holdings could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Brook Crompton Holdings' Dividend

Overall, we think Brook Crompton Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Brook Crompton Holdings you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.