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 14th of November. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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BRC Asia's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, BRC Asia was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 4.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 62% by next year, which is in a pretty sustainable range.

Check out our latest analysis for BRC Asia

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was SGD0.065 in 2015, and the most recent fiscal year payment was SGD0.20. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. BRC Asia has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. BRC Asia has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like BRC Asia's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for BRC Asia that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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