BRC Asia (SGX:BEC) Has Announced A Dividend Of SGD0.06

The board of BRC Asia Limited (SGX:BEC) has announced that it will pay a dividend of SGD0.06 per share on the 15th of November. This makes the dividend yield 6.7%, which is above the industry average.

View our latest analysis for BRC Asia

BRC Asia's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. But before making this announcement, BRC Asia's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to fall by 1.9%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 60%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.10 in 2014 to the most recent total annual payment of SGD0.16. This means that it has been growing its distributions at 4.8% per annum over that time. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BRC Asia has seen EPS rising for the last five years, at 29% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On BRC Asia's Dividend

In summary, while it's always good to see the dividend being raised, we don't think BRC Asia's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments BRC Asia has been making. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for BRC Asia (of which 1 is potentially serious!) 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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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.